The successful OPEC+ deal that’s supported the oil market since the price crash earlier this year is threatened by a new fissure at the heart of the cartel.
Unusual tensions between Saudi Arabia and the United Arab Emirates -- longtime OPEC stalwarts and close allies -- have prevented what was widely expected to be a routine agreement to delay a production increase scheduled for January. Instead of a deal, a ministerial video conference on Monday delivered nothing to the expectant market, and yielded frustration and recrimination behind closed doors.
Informal talks will continue by phone in the coming days, after OPEC+ gave itself more time to reach a compromise by pushing back its final meeting by two days to Thursday. Behind closed doors, oil diplomats tried to lower the temperature, with delegates saying they should be able to patch up their differences after consultations with their own governments.
Many cartel-watchers also expect a compromise that would see the bulk of the group’s production cuts continue, underpinning the recent rally in crude prices. However, the depth of the split also raises the slim possibility of a more damaging breakdown that could trigger another oil crash.
“The market is underestimating a little bit how serious this is -- this is one of Saudi Arabia’s biggest allies,” Amrita Sen, co-founder of consultant Energy Aspects Ltd., told Bloomberg Television. She didn’t predict a messy outcome this week, but sees tensions persisting into next year.
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