OPEC kingpin Saudi Arabia was deep in talks with the UAE on July 14 to resolve a dispute over the latter's output target, with the bloc's plans to raise crude production over coming months with Russia and several allies hinging on the outcome.
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The discussions are centering around a preliminary understanding to grant the UAE a new production baseline of 3.65 million b/d from May 2022, according to a source involved in the meeting.
That would be an increase of about 480,000 b/d from its current baseline of 3.168 million b/d, which will remain in place through April, the source said, asking not to be named due to the sensitivity of the discussions.
It is less than the close to 700,000 b/d rise that the UAE had been seeking, but would also be a concession from Saudi Arabia, which had wanted to hold the line on output targets through the end of 2022.
Baselines, which were set using October 2018 production volumes, are used by the OPEC+ alliance to set output quotas, so a higher baseline for the UAE would result in a more generous allocation. Emirati officials have sought the revision to reflect the country's increased production capacity.
Delegates from other OPEC+ members said they had yet to be briefed about the deal, which would need to be unanimously approved by the 23 countries in the coalition.
The rift between Saudi Arabia and the UAE has threatened to scupper a largely agreed accord for the OPEC+ group to lift output by 400,000 b/d monthly and extend their supply management pact beyond its April expiry through the end of 2022. The UAE has been the lone holdout.
A new deal may be too late to take effect for August, with many members' national oil companies already informing their contractual customers of the volumes of crude they would be receiving for the month.
"We will see how to manage it," one source said of the August quotas.
The OPEC+ alliance is currently withholding about 5.8 million b/d of crude production, which it intends to unwind as demand recovers from the pandemic.