- Jul 12, 2021 3:18 am GMT
Oil producer group OPEC has been plunged into crisis, with bitter infighting between Saudi Arabia and the United Arab Emirates raising questions about the future of the energy alliance.
- The dispute comes as energy market participants anxiously await policy direction that is likely to share crude markets onto next year.
- The pandemic held them together and now the post pandemic is breaking them apart.
If OPEC+ fails to reach a deal to increase output, prices could skyrocket.
Rising oil prices could destroy demand growth at some point, and risk the recovery of economic growth just as several economies are starting to reopen after Covid vaccinations rise.
If the talks end in utter discord, there is a risk of a return to an every-man-for-himself production scenario that could cause a reversal of this year’s oil price rally. This may not be the likely outcome, but it cannot be dismissed entirely either. Certainly, it is not a black swan scenario.
Major resource holders are not immune from the disruptions of energy transition. The writing is on the wall for fossil fuel producers, especially the NOC that are laggards in the energy transition. The question is not, will there be a cracks on the OPEC wall but when? The current spat suggests pretty soon.
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