Fitch Ratings: OPEC+ delayed output decision tests coordination capacity

OPEC+ decision to delay its meeting for the third time, to take a decision on the extent of crude oil production increases, has raised "questions" about the groups capacity to coordinate production, said global rating agency Fitch ratings in a statement.

"Saudi Arabia, Russia and the UAE are reportedly struggling to reach a compromise," said the agency in the statement.

The UAE has demanded to increase its baseline production from April 2022. The country that has the capacity of about 4 mmb/d and may increase to 5 mmb/d by 2030, based on its investment plans. However, the country has an OPEC+ production quota of just over 2.7 mmb/d in July.

"Allowing one country to raise its baseline capacity may spur similar demands from other members and jeopardise efforts to control crude supply," they added. The UAE's insistance of raising the quota may inspire other countries in the alliance to increase production capacity too.

Oil prices have already increased to the highest levels in three years due to a widening oil deficit, which the agency said they assess at slightly more than 1 million barrels per day (mmb/d).

"We ultimately expect OPEC+ to agree on production increases. In addition, Iran could add about 1.5 mmb/d of supplies if US sanctions are lifted," they added.