UAE: Opec+ faces volatile oil markets
SANCTIONS ON RUSSIAN CRUDE AND CHINA’S COVID SHIFT MAIN REASONS
OThe whole world needs to think of resources and how to enable companies to produce more gas to make it available and affordable.”
pec+ is facing “volatile prospects” in oil markets both in supply and demand, UAE energy minister Suhail Al Mazrouei told Asharq TV Yesterday.
He said this was due to European sanctions on Russian crude taking effect in addition to China lifting its “zero-Covid” policy.
Opec+ production capacity was down 3.7 million bpd due to fewer investments in the oil sector, Al Mazrouei said.
He also said UAE is taking preemptive steps to compensate for the reduced oil production capacity in some countries by bringing forward its five million barrel per day oil production capacity expansion to 2027 from a previous target of 2030.
Suhail Al Mazrouei | UAE Energy Minister
Gas outlook
Meanwhile, Al Mazrouei and Qatari state minister for energy, Saad Al Kaabi, yesterday said the world will need natural gas for a long time and more investment is required to ensure supply security and affordable prices during the global energy transition.
Al Kaabi told the Atlantic Council Global Energy Summit in Abu Dhabi that a mild winter in Europe had seen prices come down, but that volatility would remain “for some time to come” given there was not much gas coming into the market until 2025.
“The issue is what’s going to happen when they (Europe) want to replenish their storages this coming year and the next year,” he said. The Qatari minister said he believed that Russian gas would eventually return to Europe.
Al Mazrouei, speaking on the same panel, agreed that “for a very long time, gas will be there” and that while more renewable energy would be installed, more investment was needed in gas as a base load.
“The whole world needs to think of resources and how to enable companies to produce more gas to make it available and affordable,” Al Mazrouei said.
Natural gas markets could whipsaw for the next several years because there’s still too little supply to meet rising demand, according to the energy minister of Qatar.
“It’s going to be a volatile situation for some time to come,” Saad Al Kaabi said at an Atlantic Council conference in Abu Dhabi. “We’re bringing a lot of gas to the market, but it’s not enough.”
Next winter may be tough for gas consumers in the northern hemisphere, he said, as they will probably struggle to replenish their stockpiles before then in the absence of flows from Russia.
Gas prices soared after Russia’s attack on Ukraine last February and Moscow cut piped supplies to Europe. Prices have slumped since the middle of 2022 as economies slowed and thanks to Europe ramping up imports of liquefied natural gas, including from Qatar. A warmer-than-normal winter in Europe has also helped.
But prices remain far above historical averages and could jump again if China’s economic re-opening leads it to increase purchases of gas. Europe may also have to fill up its reserves over the summer with barely any flows Russia, easily its biggest supplier before the Ukraine war.
High prices are hurting consumers, Al Kaabi said.
“The biggest challenge we face as producers is demand destruction and there is demand destruction for both gas and oil,” he said.
Qatar is investing around $45 billion to increase its production by almost 60 per cent. But that project won’t be finished until 2027.
Al Kaabi said Qatar will sign more deals this year with consumers for the new gas. In November, it made multi-year agreements to supply some of it to Germany and China.
Qatar will also sign so-called off-take deals for its LNG assets in the US in 2023, he said. The Gulf country owns 70 per cent of the Golden Pass export terminal in Sabine Pass, Texas.
We’re bringing a lot of gas to the market, but it’s not enough... The biggest challenge we face as producers is demand destruction and there is demand destruction for both gas and oil.”
Saad Al Kaabi | Energy minister of Qatar