(Bloomberg) — Saudi Arabia insisted on Sunday night that OPEC+ must extend its production agreement to the end of next year, sticking to a plan that has met with strong opposition from the United Arab Emirates.
“We still need an extension for that agreement to carry on,” Saudi Energy Minister Prince Abdulaziz bin Salman said in an interview with Bloomberg TV on Sunday.
In an indication of the seriousness of the diplomatic standoff, Prince Abdulaziz implied that Abu Dhabi was isolated within the OPEC+ alliance. “It’s the whole group versus one country. I’m sad but that’s the reality of the day,” he said.
He indicated that they couldn’t give in to UAE demands as it would set a precedent for others in the group.
The United Arab Emirates on Friday blocked an OPEC+ deal that cartel leaders Russia and Saudi Arabia hashed out to increase output, demanding better terms for itself. After two days of bitter negotiations, and with the UAE the only holdout, ministers halted the discussions until Monday, leaving markets in limbo as oil continued its inflationary surge above $75 a barrel.
Prince Abdulaziz said he had not spoken to his counterpart in Abu Dhabi, Suhail al-Mazrouei since Friday. “I haven’t heard from my friend Suhail,” he said. Asked if more senior officials had been in touch, he declined to comment.
Abu Dhabi is forcing its allies into a difficult position: accept its requests, or risk unraveling the OPEC+ alliance. Failure to reach a deal would squeeze an already tight market, potentially sending crude prices sharply higher. But a more dramatic scenario is also in play — OPEC+ unity may break down entirely, risking a free-for-all that would crash prices in a repeat of the crisis last year.
The UAE said it’s in favor of adding more oil to the market, but rejects a second part of the Russian-Saudi plan to extend the current deal until the end of 2022. Before doing so, Abu Dhabi is requesting that the baseline for its own production is revised significantly higher.
Prince Abdulaziz said that without the extension of the agreement, there’s a fallback deal in place — under which oil output doesn’t increase in August. Asked if they could hike production without the UAE on board, he said: “We cannot.”
But he kept the door open to trying again to reach an agreement, and said he would work hard to do so: “Tomorrow is another day.”
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