Could OPEC's house of cards collapse?

Dubai: All is not well in the house of OPEC. As the cartel's oil ministers prepare to meet in just over a week to decide on the next step in their record-breaking output deal, officials in the United Arab Emirates, normally a loyal Saudi ally, are privately questioning the benefits of participating, and may even be considering whether to leave the Organization of Petroleum Exporting Counties.

The deliberations, leaked to the press on Wednesday, may be nothing more than an attempt to get the producer group to review the Persian Gulf country's quota. If so, it seems unlikely to succeed. Worse, it risks throwing a wrench into the discussions over how producers should respond to the conflicting pressures from positive vaccine news and the negative impact of renewed coronavirus lockdown restrictions on travel and economic activity.

Questions about the UAE's future in OPEC, even if they are only preliminary internal deliberations, come at an awkward time for the group and its OPEC+ allies. Tensions are emerging over what to do about output targets, which are set to be eased from the beginning of next year.

The answer seems obvious. Covid-19 vaccines are unlikely to affect oil demand any time soon and stockpiles remain high. Meanwhile, Libya, an OPEC member emerging from civil war, has added about 1 million barrels a day to supply in a matter of weeks. As a result, the OPEC+ alliance is expected to extend the current output cuts for another three to six months.

But there's a spanner in the works: Not everyone is respecting their commitments. So the UAE, already chafing at the restrictions, says there shouldn't be any decision until all members have fully implemented their agreed cuts. Figures presented at last week's meeting of the Joint Ministerial Monitoring Committee, which oversees the OPEC+ output deal, show that fewer than half of its signatories have done so.

While over-producers like Iraq, Nigeria and the UAE itself have come under intense pressure from OPEC's de facto leader Saudi Arabia to compensate for past failings with deeper "compensation cuts," one country has remained conspicuously absent from the roster of cheats: Russia. Despite being the OPEC+ group's second-largest over-producer, the country has faced no public criticism

whatsoever.