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The way forward for OPEC+

In this interview with Cyba Audi from Asharq Business Bloomberg, Dr Carole Nakhle, CEO of Crystol Energy, comments on the statements of the Saudi and Emirati Ministers of Energy and the way forward for OPEC+.

Dr Nakhle observed that it is the first time that key OPEC ministers resort to the media to openly express their dissatisfaction with the terms of the deal. The latest spat within the producers’ group, however, is not new; it reflects a fundamental problem of such a diverse organization – primarily the poor compliance by some members. During the past months, OPEC+’s  overall compliance to the assigned quotas impressively exceeded 100%, though it has remained unevenly distributed among the members. On one side, the Gulf countries led by Saudi Arabia complied to the assigned quotas for the whole period, whereas, Russia and other smaller members under-complied to a larger extent.

The latest disagreement is not about whether production should be increased in the coming months – all members seem to be aligned on that but the UAE’s has opposed an extension of the deal under current production shares beyond April 2022. Although this has emerged in OPEC+ July meeting, last year, the Saudi Energy minister expressed its preference for the deal to be extended beyond its original expiry date.

Dr Nakhle remains hopeful that the current disagreement will be resolved as threatening the integrity of the deal at a time when oil markets remain fragile is not in the group’s nor its members’ interest. After all, oil prices are where they are today because of OPEC+ and not market fundamentals.

Dr Nakhle further pointed out the divergence between OPEC members in terms of the ability to ramp up production. African and Latin American countries, for example, have struggled to increase production largely because of limited investment capacity which has been notable over the last few years. In contrast, the UAE has the ability to increase its production capacity and is already doing so and have set an ambitious production target of 5 million barrels per day by 2030.

Finally, Dr Nakhle doesn’t expect the alliance to dissolve any time soon since, within its more than 60 years of existence, it has faced much tougher challenges. Typically, the stronger members have subsidized the weaker players for the sake of the longevity of the group.

Watch Dr Nakhle's interview (in Arabic):

Related Analysis

Oil Intensity: The curious relationship between oil and GDP“, Christof Rühl and Tit Erker, May 2021

Related Comments

Global Economy and Energy Markets Weekly Commentary – 4th Jul ’21“, Christof Rühl, Jul 2021

OPEC+ output decision and oil market outlook“, Dr Carole Nakhle, Jul 2021

Iran’s return to global oil markets“, Dr Carole Nakhle, Jun 2021

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