The Daily Update: Saudi / UAE Oil Spat

The US administration is calling for OPEC to find a ‘compromise solution’ after the cartel called off talks yesterday due to the United Arab Emirates rejecting a suggested eight-month extension to curbs on its output. In a statement the White House spokesperson said ‘The United States is closely monitoring the OPEC+ negotiations and their impact on the global economic recovery from the COVID-19 pandemic’ adding ‘We are not a party to these talks, but Administration officials have been engaged with relevant capitals to urge a compromise solution that will allow proposed production increases to move forward’.

The call comes after OPEC and its allies abruptly called off their July 5 meeting, after mediation efforts failed to resolve the ongoing spat between Saudi Arabia and the UAE. The standoff is seen as raising the risks that the cartel could steer the market into a supply squeeze if it sticks to current quotas or result in a damaging price war if the coalition collapses. As yet no date has been set for a rescheduled meeting, though representatives said members were still holding backchannel discussions to try and broker a deal between the Gulf neighbours and rivals.

The UAE is the cartel's fourth-biggest producer. At the end of last week, it accepted an offer from Saudi Arabia and other OPEC+ members to increase output in stages by about 2 million bpd from August. However, it rejected extending remaining cuts to the end of 2022 from a current end date of April without adjusting its current baseline production.

At time of writing Brent crude was trading above $77.5 bpd, its highest level since April ’15.