Opec+ postpones meeting as it considers UAE's request to review baseline

The Emirates is Opec's third-biggest producer and is concerned that an outdated reference is being used to calculate its production quotas

Opec+ is considering bringing 2 million bpd back to the markets by the end of the year. AFP

Opec+, the group of oil exporters that have been attempting to balance market demand and supply, postponed a delayed ministerial meeting to consider the UAE's request to review the baseline used to determine its quota, according to sources familiar with the matter.

"The co-chairs [Saudi Arabia and Russia] of the JMMC [joint ministerial monitoring committee] require more time to consider the UAE’s position," an Opec+ source said.

"The UAE remains absolutely committed to the proposed increase of production in August," the source added.

Opec+ confirmed the cancellation of the ministerial meeting in a statement and said a new date will be “decided in due course”.

The UAE, Opec's third-biggest producer, has called on the exporters' group to "decouple" output restrictions from plans to extend its existing agreement beyond April 2022.

This is the third time Opec+ has deferred its ministerial meeting, which was originally scheduled for Thursday. The group planned to meet on Friday following differences among producers, however that meeting was pushed to Monday.

The group is meeting to consider bringing back 2 million barrels per day to the markets by the end of the year.

The UAE, which plans to raise its production capacity to 5 million bpd by 2030, is concerned about an outdated baseline reference that is currently being used to assign its production quotas.

"The UAE and its international partners have invested significantly in growing its production capacity and believes that, if or when the agreement is extended, the baseline reference figures should reflect its actual production capacity, rather than the outdated October 2018 production reference," the Ministry of Energy and Infrastructure said in a statement on Sunday.

The country's energy minister said continuing to calculate the UAE's production quota on the basis of the 2018 baseline was "unfair". According to estimates, the discrepancy between the baseline used to compute the UAE's quota under Opec+ and the country's current production capacity is 18 per cent – the highest among the producers within the group.

"The fact that the meeting got postponed today and the time it took for this to be announced shows that there are some negotiations on the sidelines, which can also be interpreted by the market as an effort to reach a consensus between the Opec+ members," said Louise Dickson, oil markets analyst at Rystad Energy.

Oil prices continued to remain bullish on the prospect that an ongoing deadlock will maintain the current level of production curbs among Opec+ members.

Brent, the international benchmark rose 0.88 per cent to trade at $76.84 per barrel at 8.07pm UAE time on Monday. West Texas Intermediate, which tracks US crude grades, was up 1.10 per cent at $75.99 per barrel.

"Although a no-deal on its own would be a bullish development, as it bonds Opec+ members to the original deal in place, the rising uncertainty over the meeting’s outcome is still a good opportunity for some profit-taking" by traders, Ms Dickson said.