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Oil row flares as UAE rejects 'unjust' OPEC+ output deal
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A 3D-printed oil pump jack is seen in front of displayed OPEC logo in this illustration picture, April 14, 2020. /Reuters

A 3D-printed oil pump jack is seen in front of displayed OPEC logo in this illustration picture, April 14, 2020. /Reuters

The United Arab Emirates (UAE) on Sunday criticized the current oil output deal among OPEC+ alliance members as unjust, escalating a row that could derail the energy market's post-pandemic recovery.

The UAE's push to increase its production baseline is reported to have derailed last week's meeting of the alliance of oil-producing countries, and also sets it against its ally Saudi Arabia.

"The UAE demands to have justice in the new agreement after April, and it is our sovereign right to demand reciprocity with the rest of the countries," Energy Minister Suhail Mohamed Al-Mazrouei said in a television interview.

"It is unreasonable to accept further injustice and sacrifice – we have been patient," he said.

While OPEC+ leaders Saudi Arabia and Russia support extending the deal as it is until December 2022, the UAE wants to lock in an increase in production before agreeing to an extension beyond April when the current agreement expires.

Video-conference talks were held Friday between the 13 members of OPEC proper led by Saudi Arabia, followed by a technical meeting and discussions between the 23 members of OPEC+.

The wider grouping includes Russia, the world's second-largest oil producer.

The hitch in discussions came "due to the UAE raising a last-minute objection to the Russian-Saudi Arabia deal reached earlier", according to analysts from Deutsche Bank.

"The UAE, which has raised its production capacity since 2018 when the individual baselines were set, insisted on having its baseline lifted by 0.6 million barrels per day (bpd) to 3.8 million bpd, thereby allowing them a unilateral production increase within the current quota framework," said Ole Hansen from Saxobank. 

"Negotiations... will be difficult as OPEC+ knows that if the UAE is allowed to produce from a different base, other members may protest," said Louise Dickson from Rystad.

OPEC+ essentially faces a choice between acceding to Abu Dhabi's demands, or failing to reach a deal which could drive crude prices sharply higher. Also at risk is the unity of the alliance, which if broken could trigger a price war that would create global economic havoc.

Source(s): AFP

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