In OPEC Deadlock, U.A.E. Steps Out of Saudi Shadow

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The Wall Street Journal 05 July, 2021 - 04:37pm 48 views

The group called off a meeting scheduled for Monday after Saudi Arabia, the cartel’s de facto head, couldn’t convince the United Arab Emirates—typically one of its most dependable supporters in the group—to sign off on a deal to boost output and tame prices, according to people familiar with the matter. The Organization of the Petroleum Exporting Countries was due to meet with a group of Russia-led oil producers, an alliance called OPEC+, after hammering out a tentative deal to pump more oil late last week.

The U.A.E. has blocked that deal, asking for scope to produce more of its own oil under any accord.

Oil prices rose to fresh multiyear highs after the OPEC meeting was called off. Futures on Brent crude, the benchmark in international energy markets, jumped 1% to $76.96 a barrel, their highest level since late 2018. West Texas Intermediate, the main grade of U.S. crude, gained 1.1% to $76.06 a barrel.

Early last year, the group agreed to cut its collective output by some 9.7 million barrels a day, taking out the equivalent of about 10% of 2019 global demand, when economies were shutting down. The group has since restored a big chunk of that. On Friday, most delegates agreed to a deal to gradually undo the rest, some 5.8 million barrels a day, by increasing production by 400,000 barrels a day each month through late 2022.

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OPEC+ Crisis Deepens as UAE and Saudis Refuse to Budge

Bloomberg Markets and Finance 05 July, 2021 - 03:03pm

Europe drifts lower despite Friday’s NFP outperformance

FXStreet 05 July, 2021 - 03:03pm

European markets are following their Asian counterparts lower, with Friday’s jobs report failing to lift sentiment. Supermarket stocks lead the way, with a fresh Morrison’s bid raising hopes of a bidding war. Meanwhile, OPEC+ talks continue, with crude prices pushing back towards Thursday’s high.  

Strong US jobs report fails to lift stocks in Asia and Europe. 

Morrison's takeover bid lifts supermarket stocks. 

OPEC+ talks continue, with crude grinding higher despite the standoff.  

European indices have started the week on a somewhat indecisive footing, with overnight losses throughout Asia highlighting the lack of bullish follow-through after Friday’s impressive non-farm payrolls figure. Nonetheless, while Friday’s payrolls figure did draw conclusions that we could see a ramp-up in growth, there are questions over whether traders should in fact be cautious owing to the implications for monetary policy. Elsewhere, a sharp slump in the Caixin Manufacturing PMI has highlighted the fact that Chinese Covid restrictions have seen economic growth across the country almost grind to a halt in June. 

Supermarket stocks are leading the way today, with Morrison’s at the front of the queue. Despite Morrison’s apparently accepting a £6.3 billion takeover offer from Fortress Investment Group, speculation of a bidding war has seen the stock trade above the 254p bid made by the US investment group. It appears that after years of price wars decimating profits throughout the sector, investors are hoping that they finally benefit from a bidding war between three separate American investment firms. With the UK takeover panel giving additional time for rival groups CD&R and Apollo to respond, there could be plenty left to run on this story.  

OPEC+ talks look set to continue, with crude prices continuing to grind higher despite UAE efforts to raise production levels in the future. The agreement between Saudi Arabia and Russia to raise production by 400,000 barrels per month have been pushed back by the UAE, raising concerns that we could see the country break away if undermined. Nonetheless, the continued grind higher in energy prices serves to highlight the confidence that Saudi Arabia will be able to bring the UAE on-side in a bid to maintain an upward trajectory in prices.  

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EUR/USD is trading above 1.1870, turning positive for the day. The dollar is retreating with US yields, in an extended response to Friday's Nonfarm PAyrolls. Upbeat eurozone PMIs underpin the euro. Liquidity is thin due to a bank holiday in the US.

GBP/USD is trading around 1.3850, benefiting from UK PM's Johnson's insistence of removing restrictions on July 19, despite an increase in covid cases. An upgrade to June's Services PMI and a Brexit truce also help sterling. The dollar is on the back foot.

Gold struggles to extend three-day run-up, picks up bids of late. Risk appetite sours as traders await Fed minutes to confirm a reduction in rate hike bets. US holiday, light calendar elsewhere signal subdued markets ahead.

Dogecoin price is consolidating in a narrow range as investors move to newer meme coins. This range-bound move for DOGE is similar to what other similar cryptocurrencies are experiencing as the hype around them wither away. 

American job creation forged ahead in June and, for a month at least, may have threaded the cross-currents of the economy, fast enough to set aside a labor market stall and temper wage increases but not so excessive to excite talk of a bond taper. 

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OPEC+ Deal Fails, Leaving Oil Market Tighter as Prices Surge

Yahoo Finance 05 July, 2021 - 11:50am

Several days of tense talks failed to resolve a bitter dispute between Saudi Arabia and the United Arab Emirates, delegates said, asking not to be named because the information wasn’t public. The group didn’t agree on a date for its next meeting, according to a statement from OPEC Secretary-General Mohammad Barkindo.

The most immediate effect of the breakdown is that, unless an agreement can be salvaged, the Organization of Petroleum Exporting Countries and its allies won’t increase production for August. That will deprive the global economy of vital extra supplies as demand recovers rapidly from the coronavirus pandemic.

However, the situation is fluid and the group could reactivate talks at any moment. With prices up about 50% this year and climbing toward $80 a barrel, the producers’ group may feel extra pressure from consuming countries concerned about rising inflation.

“Oil prices will pop if no deal means current production levels continue,” said Jason Bordoff, director of the Center on Global Energy Policy at Columbia University. “But that’s also not tenable because a price spike actually undermines the interests of the UAE, Russia and Saudi Arabia.”

Brent crude jumped 1.3% to $77.12 a barrel as of 5:42 p.m. in London, the highest since 2018.

The outcome is a significant failure for the producers’ group. Relations have soured between two core OPEC members to such an extent that no compromise was possible. It damages the group’s self-image as a responsible steward of the oil market, raising the specter of the destructive internal price war that caused unprecedented price swings last year.

OPEC+ has already been reviving some of the crude supplies it halted last year in the initial stages of the pandemic. The 23-nation coalition decided to add about 2 million barrels a day to the market from May to July, and the question before ministers on Monday was whether to keep going in the coming months.

The cartel’s own data show that once-bloated oil inventories are back down to average levels as the recovery in fuel consumption continues. Demand in the second half will be 5 million barrels a day higher than in the first six months of the year, Barkindo said last week.

Responding to these pressures, OPEC+ was close to a deal last week to boost supply by 400,000 barrels a day each month, while also extending the expiry of its deal from April to December 2022. At the last minute, the UAE said it would only accept the proposal if it was granted the same terms for calculating its quota as the Saudis.

The UAE said throughout that it would accept the output increase without the deal extension, but the Saudis argued that the two elements must go together.

The dispute escalated over the subsequent days into an increasingly personal and unusually public fight, with the ministers pressing their arguments in separate TV interviews. Behind the scenes, mediation attempts by other OPEC+ members made no progress, delegates said, and the rift was evident in wider diplomatic tensions beyond oil.

“Growing differences of opinion over foreign, economic and security policies between Riyadh and Abu Dhabi, as well as over oil policy itself, will complicate future OPEC discussions,” said Amrita Sen at consultant Energy Aspects Ltd. in London. “No additional oil in August, at a time when the physical market is incredibly tight, can easily lead to prices overshooting above $90 a barrel,”

(Updates with analyst comment in fifth paragraph.)

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DUBAI (Reuters) -OPEC+ ministers called off oil output talks on Monday after clashing last week when the United Arab Emirates rejected a proposed eight-month extension to output curbs, meaning no deal to boost production has been agreed. But four OPEC+ sources said there had been no progress. OPEC's Secretary General Mohammad Barkindo said in a statement on Monday the meeting had been cancelled, without a date for the next one being agreed.

LONDON (Reuters) -Oil prices rose on Monday, driven higher after OPEC+ nations called off talks on output levels, meaning no deal to boost production has been agreed. OPEC+ ministers abandoned the talks and set no new date to resume them, after clashing last week when the United Arab Emirates rebuffed a proposed eight-month extension to output curbs. The Organization of the Petroleum Exporting Countries and its allies, a group known as OPEC+, agreed on record output cuts in 2020 to cope with a COVID-induced price crash.

(Bloomberg) -- U.S. equity-index futures fluctuated between gains and losses, as crude oil surged above $76 per barrel and investors weighed the potential for a more hawkish tilt at the Federal Reserve and worsening OPEC+ tensions over oil production.Contracts on the S&P 500 Index ended little-changed after the benchmark index notched up another record on Friday. West Texas Intermediate crude rose for the fourth time in five days after the oil-exporters club called off another meeting to discuss

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DUBAI (Reuters) -Saudi Arabia's energy minister pushed back on Sunday against opposition by fellow Gulf producer the United Arab Emirates to a proposed OPEC+ deal and called for "compromise and rationality" to secure agreement when the group reconvenes on Monday. It was a rare public spat between allies whose national interests have increasingly diverged, spilling over into OPEC+ policy setting at a time consumers want more crude to aid a global recovery from the COVID-19 pandemic. OPEC+, which groups the Organization of the Petroleum Exporting Countries and its allies, voted on Friday to raise output by some 2 million barrels per day from August to December 2021 and to extend remaining cuts to the end of 2022, but UAE objections prevented agreement, sources had said.

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Analysis: OPEC disagreement lays bare growing UAE-Saudi economic rivalry

Reuters 05 July, 2021 - 11:37am

DUBAI, July 5 (Reuters) - Rare public disagreement between the United Arab Emirates and Saudi Arabia over OPEC policy points to a growing economic rivalry between the two largest Arab economies which only looks set to intensify, several regional analysts said.

The UAE's opposition this weekend to a proposed eight-month extension to output curbs, favoured by Saudi Arabia, was a rare display of defiance by Abu Dhabi, whose Crown Prince Mohammed bin Zayed al-Nahyan has been a staunch ally of Saudi Crown Prince Mohammed bin Salman.

The disagreement led the OPEC+ talks to be called off on Monday.

"The current OPEC standoff signals a wider push by the UAE to assert its economic and national self-interest vis-à-vis Saudi Arabia," said Amir Khan, senior economist at Saudi National Bank.

The alliance between the young ambitious princes had propelled a hawkish foreign policy that saw them launch a military campaign in Yemen, lead an Arab boycott of Qatar and combat Islamist political groups in the Middle East and beyond.

But as Saudi Arabia tries to wean its economy off oil, it is vying with the UAE for foreign capital and talent, although economists say it will take time to truly challenge the region's business, trade and tourism hub.

"There is this creeping economic competition in the relationship between the two biggest Arab economies and the competition is bound to intensify," said Emirati political analyst Abdulkhaleq Abdulla.

"The UAE is speaking its mind ... but the relationship is strong and the leadership know how to resolve issues," he said.

The UAE foreign ministry and the Saudi government communications office did not immediately respond to Reuters requests for comment on their economic and political relations.

While common perceived threats from Iran and Islamist groups in the region are likely to keep a lid on political differences, analysts say, the two states are seen as likely to increasingly butt heads on matters of economic sovereignty.

Riyadh has warned foreign firms they could lose out on state contracts if they do not set up regional headquarters in the kingdom by 2024 and in another challenge to the UAE's status as the region's trade and business hub, it this week amended rules for imports from Gulf states to exclude goods made in free zones, a major driver of Dubai's economy.

Several diplomats in the region have said the UAE-Saudi alliance has gone as far as it can as national economic interests take precedence, especially in the wake of the COVID-19 pandemic.

The first indication of a parting of ways came in 2019 when the UAE withdrew its military presence in Yemen, leaving Riyadh mired in a costly war that directly threatens its security. Abu Dhabi still maintains sway via Yemeni forces, some of whom have challenged Yemen's Saudi-backed government.

The UAE has also dragged its feet on a deal announced by Saudi Arabia in January to restore political ties with Qatar as Riyadh moved to ease friction with U.S. President Joe Biden over its human rights record and Yemen.

While the UAE last year forged ties with Israel in a move that enjoyed bipartisan support in Washington, Riyadh has by contrast made tentative moves to improve its relationship with Turkey.

But the UAE and Saudi remain bound by concern over Iran's expanding influence via regional proxies and security threats that pose a risk to their economic ambitions.

The UAE started engaging with Iran in 2019 to ease tensions after attacks on tankers in Gulf waters and on Saudi oil plants that Riyadh blamed on Tehran, a charge it denies.

The kingdom followed suit this year, launching direct talks with Tehran over Yemen where they are locked in a proxy conflict. The move came as Biden sought to revive a nuclear deal between global powers and Iran that Riyadh opposed for not tackling Iran's missile capabilities and regional activities.

"The potential U.S.-Iran detente, the energy transition, and competition in non-oil diversification makes for a particularly challenging period of divergence this time round," Hasnain Malik, head of equity strategy at Tellimer, said of Saudi-UAE relations.

Saudi National Bank's Khan said the UAE, which has invested heavily to boost oil output capacity, wants to move quickly to monetise reserves given a global push away from fossil fuels.

Saudi Arabia is in greater need of price stability to deliver on domestic mega projects that are largely being driven by its sovereign wealth fund.

"Now you can see head-to-head confrontation and the UAE is punching above its weight," one foreign diplomat in Riyadh said of the OPEC disagreement. "This is the first time the two countries exchange public and strongly worded accusations."

While economic issues could see further public disagreement, Riyadh and Abu Dhabi are expected to continue to deal more discreetly with political matters to preserve an image of unity, said British academic and Gulf expert Christopher Davidson.

Our Standards: The Thomson Reuters Trust Principles.

Rare public disagreement between the United Arab Emirates and Saudi Arabia over OPEC policy points to a growing economic rivalry between the two largest Arab economies which only looks set to intensify, several regional analysts said.

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UAE-Saudi Arabia oil spat: All you need to know

Al Jazeera English 05 July, 2021 - 06:59am

Saudi Arabia has led a push in OPEC to raise output by some 2 million barrels per day from August to December 2021 but extend remaining cuts to the end of 2022.

But the UAE pushed back on Sunday, saying a cut in output beyond the initial deadline of April 2022 would be “unfair to the UAE”.

The UAE has said the market is “in dire need of higher production” of crude oil following a plunge in oil prices and production last year as the pandemic hit travel and energy use.

OPEC’s sharp output cuts have kept prices from collapsing even further. However, pumping too much too soon could undermine the rebound in energy prices.

Meetings on Friday, both between the 13 members of OPEC proper and between the 23 members of OPEC Plus, failed to reach a deal on oil output.

Under a proposed OPEC Plus deal, the UAE would proportionally cut its oil production by 18 percent, while Saudi Arabia would cut its output by 5 percent.

Negotiations over the dispute were set to resume on Monday, but the meeting was called off. No new date was agreed.

Speaking to CNBC on Sunday, the UAE’s Energy Minister Suhail Al Mazrouei said that his country has “sacrificed the most, making one-third of our production idle for two years”.

“We can’t make a new agreement under the same conditions – we have a sovereign right to negotiate that,” he said.

But Saudi Arabia has imposed the deepest production cuts and urged caution over raising output during the ongoing pandemic while oil demand and economic recoveries remain weak, with the kingdom’s energy minister calling for “compromise and rationality”.

“Big efforts were made over the past 14 months that provided fantastic results and it would be a shame not to maintain those achievements … Some compromise and some rationality is what will save us,” Saudi Energy Minister Prince Abdulaziz bin Salman said.

Iraq also backed the OPEC Plus proposal to extend the pact on output curbs until December 2022, adding it expected oil prices to remain at $70 per barrel or above until then.

So far, it is yet to be seen whether the UAE would continue in its traditional role of following Riyadh’s directive, or whether it would decide to pursue a more independent policy.

While Riyadh and Abu Dhabi have seen eye-to-eye on a number of issues over the years, their national interests have also increasingly diverged.

While the UAE had initially joined the Saudi-led war against the Iran-aligned Houthi rebels in Yemen, Abu Dhabi withdrew most of its military forces from the country in 2019.

Along with Bahrain and Egypt, the UAE and Saudi Arabia launched a boycott against neighbouring Qatar in 2017. An agreement to end the boycott was announced by Saudi Arabia in January, but analysts say the UAE is less inclined to bury the hatchet.

Meanwhile the UAE’s normalisation of ties with Israel last year was not followed by Saudi Arabia.

The Gulf allies have also disagreed over restrictions related to the coronavirus pandemic. On Sunday, Saudi Arabia banned all flights to the UAE, Ethiopia and Vietnam to protect against the highly contagious Delta coronavirus variant – which accounts for many new infections in the UAE.

On Monday, Saudi Arabia amended its rules on imports from other Gulf Cooperation Council countries to exclude goods made in free zones or using Israeli input from preferential tariff concessions, in an apparent challenge to the UAE’s status as the region’s trade and business hub.

Free zones, a major driver of the UAE’s economy, are areas in which foreign companies can operate under light regulation, and where foreign investors are allowed to take 100 percent ownership in companies.

According to the decree, goods that contain a component made or produced in Israel or manufactured by companies owned fully or partially by Israeli investors or by companies listed in the Arab boycott agreement regarding Israel, will be disqualified.

The UAE and Israel signed a tax treaty last May as both sides work to spur on business development after normalising relations.

UAE energy ministry says OPEC Plus proposal to extend pact to cut oil production until end of 2022 is ‘unfair’.

The standoff could delay plans to pump more oil through the end of the year to cool oil prices.

The OPEC+ plan to loosen taps hangs in the balance after a key member objected to the deal late Thursday.   

OPEC+ crisis talks abandoned as Saudi Arabia and the UAE remain at loggerheads over oil output

CNBC 05 July, 2021 - 04:08am

LONDON — 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.

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.

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