Saudi/UAE talks continue as officials deny production pact

Quantum Commodity Intelligence – Saudi and UAE officials were still said to be in talks over whether to increase production of crude, denying earlier newswire reports based on anonymous briefings that said the two had agreed a compromise.

Local media Arab News quoted unnamed sources as saying the two producers were "still in discussions" over whether to increase the UAE's baseline in a move that could unlock additional crude supply.

And the UAE later issued a statement that no production agreement with OPEC+ had been reached.

"We stress that no agreement has yet been reached," the UAE energy ministry said.

Earlier in the day, Reuters and other newswires quoted officials as saying a compromise had been struck between the two to set the UAE baseline at 3.65 million bpd – a move that would allow the UAE to produce more crude and lead to a broader OPEC+ pact to produce an additional 2 million bpd by December.

However, Quantum understands that while a deal may have been reached between the two parties, it may not have been welcomed by other members of the producer group, whereby decisions are taken unanimously.

"Other producers will be asking - why them and not me," said one oil broker, speaking after the initial reports.

Another source cautioned; "It needs to be agreed by OPEC+, especially Russia. And a higher baseline - won't that open up a can of worms with other producers?"

The IEA Tuesday reiterated a warning that oil markets will "tighten significantly" unless OPEC+ can find a compromise and resolve the current stalemate.
The Paris-based energy watchdog also said global oil demand surged 3.2 million bpd in June from May to reach 96.8 million bpd.

Brent crude oil futures initially nosedived by around $1/b on the reports with the September contract falling below $75.50/b, before surging back to almost $76.50/b and then easing off.

Front-month September Brent futures were trading $76.17/barrel 1520 GMT, compared to Tuesday's settle of $76.49/b.

The IEA Tuesday reiterated a warning that oil markets will "tighten significantly" unless OPEC+ can find a compromise and resolve the current stalemate.

The Paris-based energy watchdog also said global oil demand surged 3.2 million bpd in June from May to reach 96.8 million bpd.