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Crude Oil December 04, 2020 02:30:01 AM

UAE’s Oil Expansion Gives it New Weight within OPEC

Anil
Mathews
OilMonster Author
Until recently, Saudi Arabia, which effectively leads the Organization of the Petroleum Exporting Countries (OPEC), and its Gulf allies, the UAE and Kuwait, moved together on supply policy.
UAE’s Oil Expansion Gives it New Weight within OPEC

SEATTLE (Oil Monster): The United Arab Emirates’ resistance at OPEC meetings to extend deep supply cuts into 2021 is the start of a more assertive policy stance that could make it harder for the group’s de-facto leader, Saudi Arabia, to balance global oil supply.

The seeds of the emerging divergence have their roots in a major expansion in capacity in the UAE as well as an effort that is gathering pace for the country’s oil to become one of the few grades of crude used as a benchmark to price world supply.

The UAE told its OPEC+ counterparts inside closed-door meetings this week that even though it would support a rollover of existing cuts, it would struggle to continue with the same deep output reductions into 2021, effectively delaying the latest strategy decision by OPEC and its allies.

Until recently, Saudi Arabia, which effectively leads the Organization of the Petroleum Exporting Countries (OPEC), and its Gulf allies, the UAE and Kuwait, moved together on supply policy. They even, at times, cut more supply than theyhad agreed to compensate for other OPEC members who did not reduce as much as they had pledged.

But Abu Dhabi’s growing assertiveness, underscored by its growing political independence from Riyadh on a range of issues, could mean the era of automatic cooperation is over, analysts and industry insiders say.

“The UAE and Saudi Arabia could be tilting in different directions over OPEC+ policy. Saudi policy over the last few years has largely been prioritizing prices over market share, and the logic of constant interventions in markets will be scrutinized by the UAE,” wrote Ayham Kamel from Eurasia in a research note.

“Abu Dhabi is opening the door to softer interpretations of the necessary policy actions in a post COVID world. The global energy transition towards renewables will advance further under a Biden administration, making assessments of a market share approach at least important to explore.”

Courtesy: www.reuters.com   


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