OPEC+ Agrees to Boost Output After Saudis, UAE End Standoff - Bloomberg

OPEC+ Agrees to Boost Output After Saudis, UAE End Standoff - Bloomberg

OPEC and its allies agreed to gradually add more oil supplies to the market after Saudi Arabia and the United Arab Emirates resolved a dispute.

The cartel will boost output by as much as 400,000 barrels a day each month from August until all of its halted output has been revived. The deal will also give Saudi Arabia, the UAE, Iraq, Kuwait and Russia higher baselines against which their production cuts are measured from May 2022, according to a statement from the group.

The truce will ease a looming supply squeeze and reduce the risk of an inflationary oil price spike. It also puts an end to a diplomatic spat that unnerved traders, as the fight between the two long-time allies risked unraveling the broader accord between the Organization of Petroleum Exporting Countries and its allies that has underpinned the recovery in crude prices.

Saudi Energy Minister Prince Abdulaziz bin Salman celebrated the compromise at the start of Sunday’s meeting using, as he often does, a Hollywood reference.

“Instead of ‘I am back,’ we will say ‘we are back,’” the prince said.

The multifaceted agreement means several things for the oil market. It gives consumers a clear view of how quickly OPEC+ will restore the 5.8 million barrels a day of production its still withholding, since making deep cuts last year in the initial stages of the pandemic.

It also resolves longstanding grievances that have tested the unity of the groups since late 2020. The UAE has been arguing that the way its quota was calculated was unfair because it didn’t reflect a costly expansion in the country’s industry. Its baseline has now increased to 3.5 million barrels day, below the 3.8 million it initially demanded but well above the previous level of 3.2 million.