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Opec+ JMMC ends meeting without resolving UAE request
7/2/2021 12:00:00 AM
Opec+ ministers will later hold the meeting that was scheduled to take place yesterday but was deferred after the UAE proposition.

The JMMC yesterday reviewed plans for the Opec+ group to raise production by around 400,000 b/d in each month of the August-December 2021 period, which would take output to 2mn b/d above current quotas. It also floated the possibility of stretching the output restraint deal past its April 2022 expiry until the end of next year.

But discussions were roadblocked by UAE objections to a deal extension under the current baselines from which each participating country's quotas and compliance are calculated. Most Opec+ producers have been assigned an October 2018 reference level, with exceptions made for the 11mn b/d baselines of Russia and Saudi Arabia. The UAE asked to rebase these references to production levels of April 2020, a month that was not covered by any output restraint agreement. This would sharply increase the UAE's baseline from the currently used 3.168mn b/d. Argus estimates the country's production at close to 3.85mn b/d in April 2020.

That month fell between two restraint agreements, and saw a brief battle for market share between typically-close allies Saudi Arabia and Russia prompt all producers with available capacity to raise their supplies.

The UAE is in a minority of Opec countries that can substantially increase output. Its sustainable capacity is over 3.8mn b/d, according to the IEA, and this will rise above 3.9mn b/d next year. Its current production baseline is just 83pc of capacity, the lowest among Opec producers. Views diverged on whether the UAE would insist on a baseline shift starting this August, or would accept rebasing as of May 2022.

Rejigging the baseline would primarily serve producers with spare capacity, a delegate said. But Russia could be disadvantaged by a shift in reference levels to last April, when Argus estimates it produced 10.5mn b/d.

A delegate said that the baselines held by Moscow and Riyadh already represent "new" reference levels. Others said that reassessing baseline rates at the request of the UAE would open the door for a series of similar proposals from other producers. Last November, then-Opec president Abdelmadjid Attar declined a bid from Nigeria, which asked to reclassify output from its Agbami stream as condensate rather than crude, saying the adjustment would "open up the possibility for other countries, including large producers, to request changes to their obligations."