It doesn’t seem much, but the most damaging leaks often don’t. The Organization of Petroleum Exporting Countries has suffered a small crack that could grow to into a rift big enough to sink it.
No, I’m not talking about the bust-up between Saudi Arabia and arch-rival Iran, nor wrangling over Iraq’s repeated failure to abide by its output target under the current production deal. Rather, I’m referring to a decision by the United Arab Emirates, the group’s third biggest producer, to allow its crude to be traded freely on the open market by its initial buyer. That’s an initiative that veteran oil analyst Philip K. Verleger says eventually “could weaken OPEC and the [OPEC+] Coalition.”
Until now, the big OPEC producers of the Persian Gulf — Saudi Arabia, Iraq, Iran, Kuwait and the UAE — have sold their crude under strict terms that dictate where it can be delivered and prevent its resale by the original lifter. That has given them the ability to vary the prices they charge in different parts of the world, depending on local market conditions, and maximize their revenues. A buyer’s failure to adhere to these terms has meant it could be shut out of future purchases.
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