A meeting between oil producer group OPEC and its partners, which was aiming to broker a deal on crude output after the group unexpectedly failed to reach an agreement last week, has been called off.
The energy alliance, often referred to as OPEC+, on Friday voted on a proposal to increase oil production by roughly 2 million barrels per day between August and the end of the year in 400,000 barrels per day monthly installments. It also proposed to extend the remaining output cuts to the end of 2022.
The United Arab Emirates rejected these plans, however, blocking an agreement for the second consecutive day to leave oil markets in limbo over the weekend.
OPEC+ was set to reconvene for crisis talks via videoconference at 2 p.m. London time Monday. However, after a two-hour delay, Reuters, citing two sources, said that the meeting had been postponed.
The reports were later confirmed by a communique from OPEC which said that “the date of the next meeting will be decided in due course.” Bloomberg also reported that it meant OPEC+ would continue with production quotas at current levels.
“For us, it wasn’t a good deal,” UAE Minister of Energy and Infrastructure Suhail Al Mazrouei told CNBC’s Hadley Gamble on Sunday. He added that while the UAE was willing to support a short-term increase in oil supply, it wants better terms through 2022.
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Speaking to the Saudi-owned Al Arabiya television channel on Sunday, Saudi Arabia’s Energy Minister Abdulaziz bin Salman called for “compromise and rationality” in order to reach a deal on Monday, Reuters reported.
OPEC+, which is dominated by Middle East crude producers, agreed to implement massive crude production cuts in 2020 in an effort to support oil prices when the coronavirus pandemic coincided with a historic fuel demand shock.
Led by Saudi Arabia, a close ally of the UAE, OPEC+ has since initiated monthly meetings in a bid to navigate production policy.
It has resulted in a rare public stand-off between the UAE and its long-time regional ally Saudi Arabia, OPEC’s de facto leader. The dispute comes as energy market participants anxiously await policy direction that is likely to shape crude markets into next year.
Responding to the reports, John Kilduff, a founding partner at Again Capital, said that the “Opec solidarity dissolved today.”
“The pandemic held them together and now the post pandemic is breaking them apart. The UAE is sticking to their guns on wanting their baseline raised. They want to be able to produce more,” he told CNBC via email.
“This is huge because there’s not going to be any additional output on the market and things are going to get real tight,” he added.
After news of the postponement, international benchmark Brent crude futures traded at $76.76 a barrel, up around 0.8% for the session, while U.S. West Texas Intermediate futures stood at $75.77, roughly 0.63% higher.
Oil prices rallied more than 45% in the first half of the year, supported by the rollout of Covid-19 vaccines, a gradual easing of lockdown measures and massive production cuts from OPEC+.
Analysts had expected the energy alliance to raise supply by around 500,000 barrels per day from next month.
