It is too early to judge whether the breakdown of the latest cartel meeting will escalate into a conflict between Saudi Arabia and the UAE, which is as painful and destructive as the price war last year. It is too early to draw conclusions.

The OPEC+ infighting deprived the oil market of additional supplies and caused New York crude oil to soar to a six-year high.

It is too early to judge whether the breakdown of the cartel meeting on Monday will escalate into a conflict between Saudi Arabia and the United Arab Emirates, as intense and destructive as the price war last year.

The following are some of the key events that may determine the course of the crisis in the coming days:

price fluncuation

Traditionally, Middle Eastern producers have used monthly pricing to indicate that they intend to sell more or less crude oil. Increasing costs indicates a reduction in oil, and lowering oil prices usually stimulates buyers to demand more.

Saudi Arabia on Tuesday increased its August official price of crude oil in its main Asian markets. This shows that Saudi Arabia expects that the balance of supply and demand will be more tight, as you might expect, if OPEC+ members cannot save their agreement and next month’s production remains at the current level.

The UAE’s hands are constrained by pricing because the cost of its flagship Murban crude oil is determined by exchange transactions that began this year. In August, the price of a barrel of Murban was US$72.34.

Turn on the faucet

The existing OPEC+ production restrictions still exist-as long as the members of the organization continue to respect them. If Saudi Arabia or the UAE decide to break quotas and turn on the tap, they can add at least 1 million barrels of oil a day to the market, which may depress prices.

The increase in official prices in Saudi Arabia in August shows that the country has not considered taking such a bold move.Another signal will appear in a few days, when Saudi Arabia will tell its customers how much crude oil they will get next month

Abu Dhabi has already told buyers before the OPEC+ meeting that their Murban crude oil will be lower than what they requested in August.

External pressure

Former US President Donald Trump played an important role in ending the price war between Saudi Arabia and Russia last year. When Mexico opposed the terms of the agreement, he publicly coaxed the two countries to return to the negotiating table and helped remove obstacles to negotiations.

Compared to Trump’s direct intervention, the current occupant of the Oval Office took a more traditional approach, but still quickly indicated to the cartel that he was paying close attention to the incident. A spokesperson said on Monday that President Joe Biden’s government “has approached the relevant capitals to urge a compromise solution to advance the proposed increase in production”.

As US oil futures jumped to a six-year high of just below US$77 per barrel on Tuesday, please be aware of further signs of pressure from the US to take action on OPEC+.

Quiet diplomacy

The other members of the OPEC+ alliance have not given up reaching an agreement. Iraqi Oil Minister Ihsan Abdul-Jabbar said on Monday that he hopes to “witness a date” within the next 10 days so that the meeting can be held again. He said the group should still be able to find a deal that satisfies everyone.

The country most motivated to bring allies back to the negotiating table is also one of the most powerful members of the alliance-Russia. The company is keen to increase production in August, but it will take several weeks of notice to do so. Prior to the parliamentary elections in September, rising domestic gasoline prices were an increasingly important issue.

Moscow’s failure to ensure its expected production increase was a rare setback for Deputy Prime Minister Alexander Nowak, one of the original designers of the OPEC+ Alliance. After Monday’s meeting was cancelled, he made no comments, so please be aware of any signs that he is still working to save something.

Air combat

The differences between Saudi Arabia and the UAE are extremely personal and public. Previously, the disputes between the two countries were resolved behind closed doors, but this time their energy ministers communicated through television interviews with competitors.

If the cracks continue to occur around the world, this may be a sign of further escalation.

For Neil Quiilliam, an association researcher at the Chatham Institute’s Middle East and North Africa Project, “We can expect things to get worse before they get better. This means that unless its minimum requirements are met, the UAE will worry about withdrawing from OPEC.”