Why the World Can’t Afford an Oil War - Bloomberg
It wouldn’t be an oil meeting without brinkmanship, but the stakes are high for the world economy as OPEC+ ministers resume talks today on an output agreement.
Until a last-minute objection by the United Arab Emirates, the oil cartel and its allies thought they had a deal to boost monthly supplies by 400,000 barrels a day between August and December to ease crude prices amid a revival in global demand.
As Salma El Wardany, Grant Smith, Dina Khrennikova and Javier Blas report, that sparked bitter infighting and raised the specter of last year’s output war between Saudi Arabia and Russia, which combined with slumping demand during Covid-19 lockdowns to briefly turn crude prices negative.
Failure to reach agreement would mean OPEC+ continues with existing output terms until April, adding to pressures that have already pushed prices up around 50% this year.
That risks stoking inflationary concerns in the global economy and may trigger a backlash toward the cartel from the U.S. and other major oil consumers fearful of the impact on the recovery.
There are other unpredictable factors. A deal to revive the Iranian nuclear pact may bring new oil supplies into the market if the U.S. lifts sanctions. The spread of the delta variant of Covid-19 is sending some nations back into lockdowns that may dampen demand.
As diplomatic channels buzz between the key players, the 23-nation alliance is facing a test with ramifications far beyond its members. It may take high-level political intervention to break the deadlock.
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