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It is too early to say whether the breakdown of the last meeting of the cartel could turn into a conflict between Saudi Arabia and the Basque Country that could be as harsh and destructive as last year’s price war.
By and Bloomberg
The OPEC + fight has cut off additional supply to the oil market and increased New York’s six-year rise in crude oil.
It is too early to say whether the breakdown of the poster meeting on Monday could turn into a conflict between Saudi Arabia and the United Arab Emirates that could be as harsh and devastating as last year’s price war.
Here are the main events that may determine the direction of the crisis in the coming days:
Price Moves
Producers in the Middle East have traditionally indicated their intention to sell large or smaller quantities of crude through monthly prices. Rising costs mean less oil, and lowering the price of barrels usually requires more buyers.
Saudi Arabia on Tuesday raised its crude August sales prices in the main Asian market. This suggests that the kingdom will have a tighter balance between supply and demand, as you might expect if OPEC + members are unable to renew the agreement and if the output remains at current levels next month.
The hands of the BAC are tied to prices, as the cost of crude oil in Murban is set by trading on an exchange that has started this year. A barrel of Murban will cost $ 72.34 in August.
Open the taps
Existing OPEC + production limits remain the same, while team members continue to respect them. If Saudi Arabia or the Basque Country decides to release their quotas and open the taps, they can each add at least a million barrels a day to the market, lowering prices.
The rise in official Saudi Arabian sales prices suggests that the kingdom is not posing such a bold move. Another signal will come in a few days when the kingdom tells customers how much raw they will get next month
Abu Dhabi has already told buyers before the OPEC + meeting that they will get less raw Murban than they asked for in August.
External pressure
Former US President Donald Trump played an important role in ending the price war between Saudi Arabia and Russia last year. He publicly returned the two countries to the negotiating table, and helped unblock the talks when Mexico acted contrary to the terms of the agreement.
The current occupant of the Oval Office has taken a more traditional approach than Trump’s direct intervention, but nonetheless quickly showed the poster that he is watching the events up close. President Joe Biden’s administration has “worked with the relevant capitals to demand a compromise solution that will allow the proposed production growth to move forward,” a spokesman said Monday.
After the U.S. oil futures jumped to a six-year high below $ 77 a barrel on Tuesday, watch out for more signs of U.S. pressure from the U.S. to get OPEC + to operate.
Quiet diplomacy
Other members of the OPEC + coalition have not rejected the deal. Iraqi Oil Minister Ihsan Abdul Jabbar said on Monday that he hopes to “witness a date” for another meeting in the next 10 days. The team should still find an agreement that satisfies everyone, he said.
The country with the greatest incentive to bring its allies to the table is also one of the most powerful members of the coalition – Russia. His companies plan to increase output in August, but they need to do so a few weeks in advance. Rising domestic gasoline prices are an increasingly important issue ahead of the September parliamentary elections.
The fact that Moscow did not want to ensure the desired growth in production was a rare delay for Deputy Prime Minister Alexander Novak, one of the original architects of the OPEC + alliance. He did not comment after Monday’s meeting was canceled, so wait for signs that he is still working to recover something.
Air War
The division between Saudi Arabia and the Basque Country has been unusually personal and public. Previous conflicts between the countries were resolved behind closed doors, but this time the energy ministers were communicating through televised interviews.
If the rift remains the full view of the world, this may be a sign of an increase.
Neil Quilliam, a member of Chatham House’s Middle East and North Africa program association, said, “We can expect things to get worse before things get better. And that means increasing the way the Basque Country leaves OPEC if the minimum requirements are not met.”
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