Opec, allies rule out urgent hike in oil output

The UAE has said it will not overuse its spare production capacity since the market is in good condition right now.

Leading oil exporters on Sunday ruled out any immediate boost in crude output but reassured the market that they would do whatever is necessary to balance the supply.

The decision by Opec and its allies not to urgently increase output at their meeting in Algiers was in effect a snub to US President Donald Trump, who has been persistently calling for action to cool the market.

UAE Energy Minister Suhail bin Mohammed Faraj Faris Al Mazrouei said as the market is right now in "good condition," the UAE would not overuse its spare production capacity.

"We still have a job to complete which is going to the 100 per cent," said Al Mazrouei on the sidelines of a meeting by Opec and non-Opec energy ministers. He was referring to the production compliance Opec and allies had agreed.



Saudi Energy Minister Khalid Al Falih also ruled out the need to use spare capacity to increase oil output.

"My information is that the markets are adequately supplied. I don't know of any refiner in the world who is looking for oil and is not able to get it," the Saudi minister said, adding: "I do not influence prices."

Al Falih said returning to 100 per cent compliance was the main objective and should be achieved in the next two to three months.

"We have the consensus that we need to offset reductions and achieve 100 per cent compliance, which means we can produce significantly more than we are producing today if there is demand," Al Falih said.

Benchmark Brent oil reached $80 a barrel this month, prompting Trump to reiterate his demand on Thursday that the Opec lower prices. The price rally mainly stemmed from a decline in oil exports from Opec member Iran due to fresh US sanctions.

"We protect the countries of the Middle East, they would not be safe for very long without us, and yet they continue to push for higher and higher oil prices! We will remember. The Opec monopoly must get prices down now!" Trump wrote on Twitter.
Iranian Oil Minister Bijan Zanganeh said Trump's tweet "was the biggest insult to Washington's allies in the Middle East."

Russian Energy Minister Alexander Novak also ruled out the need for any immediate output increase, and said a trade war between China and the US as well as sanctions on Iran were creating new challenges for oil markets.

Seeking to reverse a downturn in oil prices that began in 2014, Opec, Russia and other allies decided in late 2016 to reduce supply by some 1.8 million barrels per day. However, after months of cutting by more than their pact had called for, largely due to involuntary reductions from Venezuela and other producers, they agreed in June this year to boost output by returning to 100 per cent compliance.

That equates to an increase of about 1 million bpd, but the latest figures show they are some way from achieving that target.
In August, Opec and its allies cut production by 600,000bpd more than their pact required, mainly as a result of falling output in Iran as customers in Europe and Asia reduced purchases ahead of the US sanctions deadline.

Last week, Opec secretary-general Mohammad Barkindo said in Fujairah that oil producers aimed to agree on a framework for long-term cooperation by December when they meet in Vienna. "Our determination is to institutionalise this cooperation and to get the permanent framework hopefully by December."

According to a majority of 200 energy industry executives polled in the UAE last week, Brent crude oil will end 2018 at above $75 a barrel, the highest year-end price in four years. Brent, after briefly breaking through $80 a barrel earlier this month, has stabilised a little below the $80 mark for the past week on mixed signals from oil producers. Brent crude has averaged year to date at $71 a barrel.

"We anticipate a decline in demand mainly driven by the trade dispute between the US and China, but also monetary policy normalisation which will affect global growth," said Dr Fahad Al Turki, chief economist and head of research, Jadwa Investment.

"All this will potentially reflect on oil prices. We're looking at $68 [average] for this year and $73 for 2019."

- issacjohn@khaleejtimes.com