OPEC+ Agrees to Further Production Cut Easing from August... UAE Returns to Agreement

Saudi-UAE Dispute Officially Ended... "Committed to OPEC+"
Despite Production Cut Reductions, Demand Surges... "Likely to Exceed $80 by Year-End"

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Hyunwoo Lee] The OPEC+ coalition of major oil-producing countries announced that it has agreed to implement an additional easing of production cuts starting next month, resuming the meeting that had previously ended in deadlock. This officially ends the oil production dispute between Saudi Arabia and the United Arab Emirates (UAE).

According to foreign media including the AP on the 18th (local time), OPEC+ resumed the oil ministers' meeting that had broken down on the 6th and announced through a statement that the additional easing of production cuts will be implemented from August. UAE Oil Minister Al Mazrouei, at a press conference after the meeting, mentioned Saudi Oil Minister Abdulaziz bin Salman, saying, "We appreciate the constructive dialogue with OPEC+," and emphasized, "The UAE is committed to OPEC+."

With this, the dispute between Saudi Arabia and the UAE, which had been a major source of instability in the international oil market, has officially ended. OPEC+ announced that starting next month, it will proceed with an additional production cut reduction plan, decreasing daily cuts by 400,000 barrels each month. The cut period has been extended from August next year to December next year. Accordingly, the current production cut volume of 5.8 million barrels is expected to be gradually reduced by the end of next year.

The production baseline, which the UAE had opposed in the existing cut plan, was decided to be raised for all major member countries. The UAE's baseline was raised from 3.16 million barrels to 3.5 million barrels, an increase of 340,000 barrels. Saudi Arabia raised its baseline from 11 million barrels to 11.5 million barrels, an increase of 500,000 barrels. Additionally, Russia raised its baseline by 500,000 barrels, and Iraq and Kuwait each raised theirs by 150,000 barrels.

This OPEC+ agreement is interpreted as being supported by the global increase in oil demand. In its statement, OPEC+ also mentioned, "Thanks to the acceleration of COVID-19 vaccination programs, there have been clear signs of improvement as economic recovery continues in most regions worldwide." CNBC reported, "Many market experts expect that despite OPEC+'s reduction in production cuts, international oil prices will rise to around $80 per barrel by the second half of this year due to increased oil demand."

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