A compromise amid uncertainty

The OPEC deal to step up crude production will ease rising prices and balance domestic and global priorities

For now, the risk has receded that the United Arab Emirates (UAE), said to hold the world’s largest untapped crude reserves, might quit the Organization of the Petroleum Exporting Countries (OPEC). The end to the UAE’s weeks-long impasse with Saudi Arabia, one of the world’s biggest crude exporters, and Russia, a non-OPEC state, was brought about by Sunday’s deal. Under its terms, the , in recognition of its higher production capacity, has been conceded. The baselines have also been raised for Saudi Arabia, Russia, Iraq and Kuwait. The bloc will now step up crude production by 400,000 barrels a day starting in August. The deal will extend until the end of 2022. The output boost is in response to rising oil prices in the wake of the rebound in economic activity following the easing of lockdown restrictions and increased COVID-19 vaccinations in different parts of the world. Sunday’s deal has also extended until the end of next year the broad terms of the unprecedented production cuts the bloc enforced in April 2020. The cartel cut oil production by 9.7 million barrels a day (mbd) as oil demand fell from 100 mbd to 91.1 mbd and prices plummeted from $70 in January 2020 to around $20 in April. The bloc has since gradually rolled back these steep cuts and hopes to return production to pre-pandemic levels by the end of 2022.