Why is Opec+ in turmoil when oil prices are climbing?

  • Date: 06-Jul-2021
  • Source: Financial Times
  • Sector:Oil & Gas
  • Country:Gulf
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Why is Opec+ in turmoil when oil prices are climbing?

The failure of the Opec+ group to secure a deal on raising oil supplies has propelled crude prices to their highest level in at least three years.

Brent, the international benchmark, reached $77.84 a barrel on Tuesday "” the highest point since 2018 "” while US benchmark West Texas Intermediate hit $76.98 "” the highest since 2014.

Why have Opec+ members fallen out?

The group agrees on the need to raise oil production, as demand has started to outstrip supply. But the United Arab Emirates, one of the most powerful members of the group after Saudi Arabia and Russia, has objected to extending an agreement first forged in April last year "” when oil prices were tumbling "” unless the group agrees to revisit how the emirates' production target is calculated.

This might seem a minor objection when the group wants to raise supply anyway, but the UAE has invested billions of dollars in increasing production capacity. It feels the so-called baseline used to calculate its production target is outdated and does not reflect that new capacity, meaning it is cutting proportionally more supply than other members.

The country's energy minister has said it will stick with its original baseline until April 2022 "” the