OPEC has suffered immensely under the pandemic and subsequent oil demand loss, and its job could now become significantly more challenging as members mull the pros of staying with the group against the con of performing the dutiful and painful task of curbing production.
And the UAE is said to be doing just that. Meanwhile, oil prices have really failed to rebound to the level that most OPEC members need them to, intensifying the predicament that most OPEC members find themselves in.
Most of OPEC’s members have budgets that rely heavily on oil income—oil income that has been reduced by the falling oil prices, and then again by their required production cuts in an effort to re-balance the oversupplied market and hold prices at acceptable levels.
Last week, rumors surfaced that the UAE was contemplating the pros and cons of their OPEC membership after the Arab oil state signed a political agreement with the Jewish regime.
While it has not officially announced a decision, or even officially announced that it was considering backing out of the group, the UAE is said to be having discussions internally about its OPEC cooperation.
The UAE officials, who have spoken privately, are asking the question of whether their OPEC membership is in the country’s long-term interest, given the sour outlook for oil demand and their need to monetize oil resources to avoid stranded assets.
Some in the UAE also believe, as does Russia, that the OPEC production cuts lift oil prices enough to encourage US shale—a fierce and resilient competitor.
This idea was also behind the collapse of the last OPEC deal in March when Russia and Saudi Arabia flooded the market with oil after Russia refused to get on board with more cuts.
Of course, these private considerations could merely indicate that the UAE is jockeying for a better deal from OPEC regarding the production cuts.
But the alliance is clearly fragile after the Zionist intervention, and the proof is the collapse of the deal earlier this year. If the UAE were to break ranks, others would surely follow.
For now, OPEC is mostly being held together by the work of Russia and Saudi Arabia. But that, too, is a thing of the past.
Saudi Arabia now has grievances with non-compliant members after carrying their water for more than a year by cutting more production to keep the group’s compliance near acceptable levels.
Saudi Arabia has indicated that it will no longer perform this duty for the group and has flipped to a more resolute stance that holds each OPEC member to their production cuts, and vowing not to curb its own production more to offset those (Iraq) who fail to reach their production cut demands.
The collapse of the deal could mean that the world will again be flooded with oil, with each OPEC+ member trying to regain any market share they lost during the strict production cut agreement.
Oil Price.com / ABC Flash Point News 2020.