OPEC+ ministers called off oil output talks on Monday after clashing last week when the United Arab Emirates balked at a proposed eight-month extension to output curbs.
Saudi energy minister Prince Abdulaziz bin Salman on Sunday called for “compromise and rationality” to secure a deal after two days of failed discussions last week.
But on Monday, OPEC+ sources said there had been no progress in resolving the matter and Monday’s meeting was called off. No new date was agreed.
The failure of the talks means an expected increase in output from August will not take place, the sources said, helping to drive up international benchmark Brent oil, which was trading 1% higher at $76.95 a barrel.
Oil prices have already prompted concerns about inflation derailing a global recovery from the pandemic.
OPEC+ agreed record output cuts of almost 10 million barrels per day (bpd) last year as the pandemic hit. They have been gradually relaxed and stand at about 5.8 million bpd.
The UAE, according to sources, on Friday went along with Saudi Arabia and other OPEC+ members on a proposal to raise output in stages by about 2 million bpd from August to December but rejected extending remaining cuts to the end of 2022 from a current end date of April.
The UAE is upset about the baseline from which its production cuts are being calculated and wants it raised. Abu Dhabi has invested billions of dollars to increase its production capacity and says its baseline was set too low when OPEC+ originally forged their pact.
It has also said it was not alone in requesting a higher baseline as others, including Azerbaijan, Kazakhstan, Kuwait and Nigeria, had requested and received new ones since the deal was first agreed last year.
Decisions in OPEC+, which groups the Organization of the Petroleum Exporting Countries with Russia and other big producers, must be unanimous.
Potential outcomes, OPEC+ sources said, include raising output from August, or raising output from August and extending the remaining cuts with a new higher baseline figure for the UAE.
OPEC+ could also go ahead with the deal as is until April 2022 and discuss a new UAE baseline as part of a new deal, the sources said.
The dispute reflects a growing divergence between Saudi Arabia and the UAE.
The two nations had built a regional alliance, combining financial and military muscle to fight a conflict in Yemen and project power elsewhere. But the UAE has withdrawn from action in Yemen, while Saudi Arabia has sought to challenge the UAE’s dominance as the region’s business and tourism hub.
The UAE in August 2020 also agreed to normalise relations with Israel, while Saudi Arabia has no official diplomatic relations with Israel.