OPEC+ impasse deepens amid rare Gulf spat

RIYADH/HONG KONG－Saudi Arabia is engaged in a rare public spat with its Emirati allies over a critical oil output deal, feeding tensions that saw an OPEC+ alliance meeting called off on Monday.

The United Arab Emirates has bitterly opposed a proposed deal by the alliance of oil-producing countries to raise production, causing a stalemate that could derail efforts to curb rising crude prices amid a fragile post-pandemic recovery.

"It's the whole group versus one country, which is sad to me but this is the reality," Saudi Energy Minister Prince Abdulaziz bin Salman told Bloomberg television, suggesting the UAE's isolation within the 23-member OPEC+ bloc.

The breakdown in talks raised the possibility of $100 a barrel－a level not seen since 2014, stoking fresh fears about inflation.

In a separate interview with Al Arabiya television, Prince Abdulaziz called for "a bit of rationality and a bit of compromise" ahead of Monday's meeting.

However, the Monday meeting was then called off and postponed indefinitely, said a source close to the OPEC+ bloc.

The group has raised oil output little by little since May, after slashing it more than a year ago when the pandemic crushed demand.

The current proposal is to have output ratcheted up by 400,000 barrels per day each month from August to December, pumping an additional 2 million bpd of crude oil into the market by the end of the year.

But talks have floundered over a proposal to extend those measures until the end of 2022.

The UAE, which only supports a short-term increase, demanded better terms for a deal extension into 2022 on Sunday.

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

"It is unreasonable to accept further injustice and sacrifice－we have been patient," he told Sky News Arabia.

At the heart of Riyadh's dispute with Abu Dhabi is the issue of baseline production levels, against which OPEC+ members determine cuts or increases.

Al-Mazrouei said his country's current baseline at 3.17 million bpd was too low and should be set at 3.8 million if the deal is extended.

That was rejected by Saudi Arabia's Prince Abdulaziz.

"I've been attending OPEC+meetings for 34 years and have never seen such a demand," he told Al Arabiya.

Frank comments

Their comments were unusually frank in a region where disputes are typically handled discreetly behind palace walls.

Prince Abdulaziz has refused to give in to Abu Dhabi, saying extending the deal until the end of 2022 was necessary for a stable energy market.

"We have to extend," Prince Abdulaziz told Bloomberg.

"The extension puts lots of people in their comfort zone."

A failure to reach a deal could drive crude prices even higher, threatening an already tenuous global recovery from the pandemic.

But it also threatens to break up the OPEC+ alliance, which could conversely trigger a price war that would create global economic havoc.

Last year, a similar disagreement over oil quotas between Saudi Arabia and Russia led to an aggressive price war that exacerbated the price collapse triggered by the pandemic.

But the UAE has stood firm, stalling OPEC+ talks last week.

"There is clearly a rush to make the most of this next and perhaps last oil boom," Karen Young from the Middle East Institute told S&P Global Platts.

"I think for the Gulf producers, the competition now becomes more of a customer relationship game."

Oil traders are watching anxiously.

"The prospect of a no-deal outcome－as well as a UAE OPEC exit－has risen materially," said analyst Helima Croft of RBC Capital Markets before Monday's meeting at the cartel's Vienna headquarters was called off.

Agencies via Xinhua