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Economy|OPEC
From Saudi-UAE spat to 2020 price war, OPEC drama is nothing new
The ongoing disagreement between the United Arab Emirates and Saudi Arabia is just the latest conflict in the oil cartel’s history.
In the latest OPEC conflict, Saudi Arabia wants to extend remaining OPEC+ cuts until the end of 2022, but the United Arab Emirates wants to defer discussion on extending the pact beyond April 2022 [File: Leonhard Foeger/Reuters]
6 Jul 2021
The ongoing spat between the United Arab Emirates and Saudi Arabia is just the latest dispute in the decades-long history of the Organization of the Petroleum Exporting Countries (OPEC).
Founded in 1960, the OPEC oil cartel has seen its share of disagreements between members, ranging from arguments over output quotas to all-out conflicts such as the Iran-Iraq war in the 1980s and Iraq’s 1990 invasion of Kuwait.
OPEC+, a group made up of OPEC, Russia and their allies that first began talks on production cooperation in 2016, has also had disputes, notably a falling-out in March 2020 just as the COVID-19 crisis hammered the oil market.
Below is a list of some of the most recent disputes in OPEC and OPEC+:
2021 – UAE-Saudi Arabia clash
The current clash between the UAE and Saudi Arabia is over how OPEC producers plan to unwind oil output cuts. Discussions were abandoned after the third day of talks failed to resolve differences. A new meeting date has yet to be arranged.
The meeting failure drove up oil prices that were already at the highest since 2018. Brent crude traded near $78 a barrel on Tuesday, up more than 40 percent this year.
Top OPEC producer Saudi Arabia wants output raised in stages by a total of two million barrels per day (bpd) between August and December and wants to extend remaining OPEC+ cuts until the end of 2022, instead of letting them expire as planned in April.
The UAE baulked at the extension and said it could support raising production by two million bpd until the end of 2021 but wanted to defer discussion on extending the pact beyond April 2022, a position Saudi Arabia has so far rejected.
2020 – OPEC+ talks collapse
A three-year OPEC+ pact collapsed in March 2020 after Moscow refused to support deeper oil cuts to cope with the outbreak of the coronavirus. OPEC responded by removing all limits on its own production.
Oil prices plunged as low as $16 per barrel in the following weeks due to a price war between the producers and because of a collapse in demand due to the pandemic.
In April, OPEC+ returned to talks and agreed on a record output cut, a deal that then-United States President Donald Trump helped to bring about, putting crude prices into recovery mode.
2016 – Doha talks fall apart
A deal to freeze oil output by OPEC and non-OPEC producers and to support the market, which was oversupplied, fell apart in April 2016. Oil prices, which had recovered to around $40 from $27 per barrel at the start of 2016, took another tumble.
OPEC member Iran, historically the second-largest OPEC producer behind its regional political rival Saudi Arabia, argued it could not join the freeze because it needed to regain production levels after the lifting of international sanctions.
Saudi Arabia, which had signalled it was willing to sign the deal without Iran, asked that Tehran’s invitation to the Doha talks be cancelled, and later demanded that Iran join the freeze. Talks fell apart after a communique could not be agreed upon.
Later in 2016, OPEC+ was brought together, agreeing on a pact on supply restraint that began in 2017.
2015 – No deal over Iran return
OPEC failed to agree on an oil production ceiling at a meeting in December 2015, after Iran said it would not consider any production curbs until it restored output that was scaled back for years under Western sanctions.
The lack of a deal pushed Brent crude down to around $43, only a few dollars off a then-six-year low.
OPEC’s then-Secretary General Abdullah El-Badri said OPEC could not agree on any figures because it could not predict how much oil Iran would add to the market in 2016 as sanctions were withdrawn.
2011 – ‘One of the worst meetings’
OPEC talks broke down in June 2011 without an agreement to raise output after Saudi Arabia failed to convince others to lift production to make up for a shortfall caused by the conflict in Libya.
The US had put pressure on Riyadh to deliver a credible deal to cap crude prices. But a majority of smaller members, including those politically opposed to the US, such as Iran and Venezuela, were against the plan.
Oil rose by $1 to above $117 on the day of the meeting, although a Saudi pledge to raise output unilaterally limited the rally.
The Saudi oil minister at the time, Ali al-Naimi, said it was “one of the worst meetings we have ever had”.
SOURCE: REUTERS
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