Organization of Petroleum Exporting Countries made an Oil Production Deal

The Organization of Petroleum Exporting Countries on Wednesday arrived at a deal after a nearly two-week standoff over its future oil production levels. The temporary but unprecedented gridlock that began in early July saw the United Arab Emirates reject a coordinated oil production plan for the group spearheaded by its kingpin, Saudi Arabia.

Abu Dhabi had demanded that its baseline for crude production, the maximum volume it’s recognized by the Organization of Petroleum Exporting Countries as being able to produce, be raised. That is because this figure determines the size of production cuts and quotas it must follow as per the group’s output agreements. Members cut the same percentage from their baseline, so having a higher baseline would allow the UAE a greater production quota.

The UAE initially called for its baseline to be raised from 3.2 million barrels a day to 3.8 million barrels a day. According to sources cited by the Wall Street Journal, the compromise reached between Saudi Arabia and its smaller neighbor will raise the UAE’s baseline to 3.65 million barrels per day from April 2022. The reports have not been officially confirmed, and OPEC and the Saudi energy ministry did not reply to CNBC requests for comment.

The initial agreement supported by most Organization of Petroleum Exporting Countries delegates set out a plan for the group to collectively bring production up to 400,000 barrels of crude per day monthly through to the end of 2022. This would end the remaining limits that were set in the spring of 2020, as economic recovery and growing demand for oil have brought crude prices up to their highest level since late 2018.