The two Gulf heavyweights of OPEC walked hand-in-hand from the OPEC headquarters to the Vienna sun, Saturday. They signaled the end of a long rift.
Saudi Arabia has reached an agreement to allow the United Arab Emirates to pump more crude oil next year. This resolves a division that nearly broke the OPEC+ Alliance two years ago.
This agreement was the beginning of many hours of difficult negotiations and hard choices for some of the poorest Africans in the group. The deal struck by two men in Vienna at the secretariat of the cartel required that exporters such as Angola, Nigeria and others hand over some of their unused production quotas.
The fraternity shown by Prince Abdulaziz Bin Salman, Saudi Arabia’s energy minister, with his Emirati counterpart Suhail al Mazrouei, was a sign of the increasing dominance of OPEC+, which is dominated increasingly by the key producers who make all the major decisions and impose their will on the smaller members.
The two men’s deal triggered a marathon of late night talks in Austria, where the African members of Organization of Petroleum Exporting Countries (OPEC) were forced to accept lower output targets as a way to compensate for the gains Abu Dhabi received.
This report is based on the comments of numerous officials who were involved in the discussions leading up to Sunday’s OPEC+ deal, and all spoke under condition of anonymity.
It was a constant struggle to get the African countries on board with the deal.
Angola’s top official abruptly left the first day of OPEC talks on Saturday, claiming he had to catch a plane. The Congo delegation left the secretariat of the group shortly after. A Saudi official then convinced them to return.
Seeing no solution in sight, the delegations headed to the Park Hyatt for a series side-meetings that afternoon with Prince Abdulaziz, and Alexander Novak, the Russian Deputy Premier, another key figure in the OPEC+ 23-nation network. Deliberations continued into Sunday morning.
A delegate from Africa was told that the OPEC+ Ministerial Meeting could be cancelled if his nation did not agree. The alliance’s final conference was scheduled for Sunday morning at 10 am. A deal had not been reached. The OPEC headquarters was packed with ministers, but the start time of the meeting kept being pushed back. Officials were trying to agree on production baselines that OPEC would use to calculate quotas.
As the process dragged out, the officials of several OPEC+ members nations were unable to access the information and updates that they would normally receive during a meeting. Secretariat staff was largely barred from the first floor of the building, where ministers were holding their closed session.
Even the delegates had differing opinions on whether a crucial committee meeting overseeing the OPEC+ agreement was actually underway.
The blackout of communications was exacerbated by OPEC, which blocked access to the event for three media outlets and closed their press conference. The cartel did not explain its decision.
It was evident that Nigeria was leading the pressure on those who refused to compromise. Saudi Arabia, in an attempt to break the deadlock and bring about a compromise, warned that the voluntary cuts announced by the key members of the group in April would be reversed if African countries did not compromise.
The Africans were in a bad position. One Middle Eastern official privately commented that if the oil market were flooded, African producers would be the ones to suffer most.
Helima Croft is the chief commodities strategist for RBC Capital Markets LLC. She said, “If there was a grace award under pressure this weekend, then we would argue that it should be given to African nations.” The willingness of these African producers to compromise was clearly helpful, given the enormous economic and social challenges they face.
After five hours in the secretariat there was a final agreement. After five hours of back-and-forth in the secretariat, a deal was reached.
The final press conference was held by officials from Nigeria, Equatorial Guinea and Saudi Arabia. They praised the agreement’s benefits.
Saudi Arabia offered a sweetener that would benefit all members of OPEC+. It pledged to cut output by at least 1 million barrels a week for a minimum of a month. Prince Abdulaziz called the move a “lollipop.”
Brent crude futures rose 1.5%, to $77.26 per barrel at 4:59 pm on Monday in London.
The most powerful members of the agreement were the main beneficiaries. Russia, who has disappointed its OPEC partner this year by maintaining high output levels despite its conflict in Ukraine and the sanctions that followed, does not have to make additional cuts this season.
The UAE was the biggest winner of the day, as it finally gained the right to use and monetize its additional production capacity that they have invested in for the last few years.
Abu Dhabi’s successes were captured in one image. On his Instagram page, Minister Al Mazrouei shared a photo of his team, dressed casually, as they walked the elegant boulevards in the Austrian capital.