Here’s an English transcript of my Al Jazeera comments on OPEC+ negotiations and some further remarks on the group’s agreement to raise production.
Good evening from Berlin.
Answer 1. Well, OPEC-Plus is faced with maintaining a very delicate balance.
On the one hand, demand in the Western world is down, its weak, while in the Eastern world, in Asia – in China and India – demand is relatively strong. And this is a complicating matter.
At the same time, in supply, in Libya, for example, the oil production is not under the [OPEC+] agreement and has been coming back on the market.
OPEC has been doing relatively well, in the last few months or so, of balancing the market. The question is, how to maintain this going forward, with its exports, how to balance supply with demand.
But what is appearing is not the big split between Russia and Saudi Arabia that we saw last year in the Oil Price War. Now we have differences … such as we see with the UAE [i.e., versus the Saudis]. The UAE would like, as we have seen, also Russia has said, an increase in production. That would be very difficult for other, more expensive producers to do at this point.
Answer 2: Yes. It does. I mean, of course the UAE has been getting a lot of press [about its demand to increase production], … so it is a matter of how serious the UAE is, and how serious the Russians are to want to raise production in some way.
It is more difficult for Saudi Arabia to meet its budget at a lower price, whereas Russia could meet its budget for longer at a lower price, and so could the UAE, so there is this conflict between them.
So, look at it this way: Now, you have a situation of people arguing among themselves, and meanwhile they are in a boat together in the ocean and no one knows when and where a big storm is coming . So, it is a very delicate matter: What is going to happen with COVID at any time?
Time rans out: My last comment would have been about UAE’s geopolitical rising star, as a challenger to the Saudi’s for leadership of the Gulf Region, and its recent establishment of relations with Israel.. UAE demands for a production increase, and threatening to leave OPEC, should be seen also in this light, as a poke in the eye of the Saudis, to diminish their aura as the leader of OPEC.
The final OPEC+ deal agreed two days after this interview included a 500,000 barrel/day gradual increase till January 2021, and monthly meetings from now on. Indeed, this is a very cautious result, consistent with my replies above, given the continued uncertainties of the COVID pandemic. It is also a modest win for both the UAE and Russia, who demanded these increases, against the wishes of Saudi Arabia. As such, this foreshadows coming geo-economic (oil market) and geostrategic challenges to the Saudi’s OPEC leadership as the market improves.
Lastly, OPEC had best be careful: prices are nearing $50/barrel — a range where US shale could come rapidly back to life and complicate OPEC+’s life once again.
Best, Tom O’D. More: http://GlobalBarrel.com