Saudi Arabia and UAE reach compromise following OPEC+ oil supply dispute

Saudi Arabia and the United Arab Emirates (UAE) have reached a compromise over future oil production baselines – according to an OPEC+ source – in a deal which should unlock more crude to a tight oil market and temper soaring prices.

A dispute between Riyadh and Abu Dhabi surfaced after a deal to add an extra two million barrels per day (bpd) to the market was proposed during a recent OPEC+ meeting. The group of oil producing allies was forced to abandon talks earlier this month against a backdrop of prices reaching a near three-year high.

While Saudi Arabia and the UAE both endorsed raising output immediately, the UAE had opposed extending the existing deal until December 2022 from April 2022 unless it was granted a higher production quota.

The OPEC+ source said on Wednesday that the Saudi’s had agreed to Abu Dhabi’s request to have UAE’s baseline – the level from which cuts under the OPEC+ agreement on supply curbs are calculated – set at 3.65 million bpd from April 2022, up from 3.168 million now.

However, the UAE energy ministry said later in the day that a deal with OPEC+ on its baseline is yet to be reached and that deliberations are continuing. OPEC+ has yet to take a final decision about the production deal, with the producers to decide on a new date for the next meeting in due course.

Brent crude prices fell on the news by as much as $1 towards $75 per barrel after reports emerged that the two major OPEC producers had agreed a deal.