Price-fixing doesn't work: UAE minister

UAE Minister of Energy Suhail Mohammed Faraj Al Mazroui.

UAE Minister of Energy Suhail Mohammed Faraj Al Mazroui on Wednesday backed healthy competition in the crude market than 'fixing the market for a price'.
"It is not a strategy everyone supports in Opec. It's not going to work as you are not alone in the market. If you try to fix the price through a cartel then someone will increase the production and beat you. What works is healthy competition to happen. We intervened to protect the market," the minister said during a session at the eighth Gulf Intelligence UAE Energy Forum 2017.
When asked if $50 oil price should be protected, Al Mazroui said: "I would never quote a price. If we target a price then we are a cartel. And we are not a cartel."
The hot discussion during each session was on how long the Opec and non-Opec producers deal will last.
"It's a commitment. I am confident everyone is committed to it. We didn't do it purely for price but for level of investments and sustainability of the industry. Countries are doing it as they know that sustainability of volume, growth and price that equilibrium is important."
On whether the discipline can be maintained on the agreement, he said: "Doing it beyond six months is premature to decide."
He said the December deal was a 'wise intervention' and led to 'good correction'.
"We needn't look just at 2017. Level of prices we have seen over past two years didn't encourage investments. So, we had huge back log of investments that we either shelved or delayed. Those investments were planned to come. The cycle from the investment till you see the barrel in the refinery is three to five years. What happen when you stop that for two years are huge circumstances, which could lead to a hike. So, what Opec and non-Opec did was wise intervention. And looking at the fourth quarter, it was a good correction. But then we still haven't yet made the actual cut."
Elaborating, he said: "Market will decide the prices. We tried $50 for some time. For some countries $50 is good but not fair for all."
Need of the hour, he said, is 'steady level of investments into the industry'.
As many as 500,000 jobs were lost in last two years in the oil industry, Al Mazroui said. "That's a lot."
On the many forecasts suggesting a recovery later in the year, he said: "The fall in prices is reaction to market dynamics. We are living in a fair competition. We need to allow different forms of energy to compete."
Shale oil, he said, is a great resource that is needed. "We can't afford shale oil to disappear. I am pro-development of shale oil. It is a new phenomenon. We have learnt a lesson."
Speaking on Iran, he said: "Iran is an Opec partner and we need collaboration of everyone. We need to be realistic. We need stability in region. We need all stability enablers to be promoted and whoever is not contributing to that stability will suffer circumstances through next generation. Let's look at how much Iran can increase their production. I am modest when it comes to increasing production."
- ashwani@khaleejtimes.com