UAE advises US shale firms not to saturate market with more oil
OPEC+ MEMBERS ‘ CAN REGAIN MARKET SHARE ONCE GLOBAL DEMAND RETURNS’
Any attempt by US shale and other oil producers to boost output this year will backfire and lead to lower prices, according to the UAE Energy Minister.
Oil prices have surged in the past two months with the development of coronavirus vaccines. They jumped again last week when Saudi Arabia said it would unilaterally cut crude output by 1 million barrels a day in February and March, a move the kingdomdescribed as a “gift” to other producers.
That’s led the International Energy Agency to state that shale firms — whose output plunged last year when the virus spread and demand for energy crashed — would again be profitable. But with global demand still fragile, they “are wise not to jump the gun and overproduce during the recovery year,” Suhail Al Mazroui, UAE Energy Minister, said in an interview on Tuesday before a forum organised by Gulf Intelligence. They “need to be careful not to flood themarket.”
With demand still fragile, [ US shale oil companies] are wise not to jump the gun and overproduce during the recovery year. They need to be careful not to flood the market.” Suhail Al Mazroui | UAE Energy Minister
Opec cuts boost markets
The Opec+ group agreed to cut output by almost 10 million barrels a day in April. Their efforts and a rapid improvement in energy demand in China and India buoyed oil prices. Brent crude has risen 11 per cent to $ 57.30 a barrel this year. But it’s still down more than 10 per cent from prepandemic levels and below what most major exporters need to balance their budgets.
US crude stockpiles climbed with the onset of the virus and as economic activity plunged. Though they fell from a peak of 541 million barrels in June to 485 million on January 1, they’re still up 12 per cent from a year ago. The IEA sees the global glut enduring for the rest of 2021.
Unchanged production
“It’s not going to be easy to just go and build production, seeing the inventory levels where they are today,” Al Mazroui said. Shale companies in the US pumped about 8.1 million barrels daily in January. That compares with 9.3 million in March 2020. At a virtual meeting last week, Opec+ agreed to keep production in February and March unchanged for all 23 members bar Saudi Arabia, Russia and Kazakhstan. The UAE pumped 2.5 million barrels daily in December, making it Opec’s biggest producer after Saudi Arabia and Iraq.
Global demand won’t return to pre- pandemic levels until the end of 2021 or early 2022, Al Mazroui said. When that happens, AlMazroui said he’s confident Opec+ countries can regain any market share they’ll lose to others by curtailing output. “We are the lowest- cost producers as Opec countries,” he said.
Abu Dhabi plans to expand production capacity to 5 million barrels a day by 2030 from 4.2 million now and to start trading its Murban crude on an exchange this quarter. Those moves “will enable us to compete and will enable us to put those volumes because theywill be needed,” AlMazroui said.