Saudi Arabia and the UAE have reportedly reached the outline of a deal that would unlock an agreement by the Organization of the Petroleum Exporting Countries (OPEC) and its allies to supply more crude to a tight oil market and cool soaring prices.
According to the sources discussions between both, countries are still continuing and the deal is not yet finalized. Brent oil prices fell by as much as $1 per barrel towards $75 per barrel after it was reported that the two major OPEC producers had agreed on a deal.
In a statement, the UAE energy ministry said that a deal with OPEC+ on its baseline is yet to be reached and that deliberations are continuing. The OPEC, Russia and their allies, a group known as OPEC+, still need to take a final decision on output policy, after talks this month were abandoned because of the Saudi-UAE dispute.
Last year, OPEC+ had agreed with record output cuts of almost 10mn barrels per day (bpd) to cope with a pandemic-induced slump in demand. The controls have been slowly relaxed since then and now stand at about 5.8mn bpd.
The dispute between Riyadh and Abu Dhabi spilled into the open after the OPEC+ talks, with both airing concerns about details of a proposed deal that would have added an extra 2mn bpd to the market to ease oil prices.
While Saudi Arabia and the UAE both endorsed raising output immediately, the UAE had opposed extending the existing deal until December 2022 from April 2022 unless it was granted a higher production quota.
The OPEC+ source said Riyadh had agreed to Abu Dhabi’s request to have UAE’s baseline, the level from which cuts under the OPEC+ agreement on supply curbs are calculated, set at 3.65mn bpd from April 2022, up from 3.168mn now.
Giving the UAE a higher production baseline paves the way for extending the overall pact to the end of 2022, the OPEC+ source said. Russia has been insisting on a quick output increase and has been among several countries mediating between Riyadh and Abu Dhabi to get a deal done as soon as possible.
It was not immediately clear if other countries would also adjust their baselines. The producers have said they will decide on a new date for the next meeting in due course.