UAE reaffirms OPEC+ commitment after exit buzz

Energy Minister Suhail al-Mazrouei said Thursday the UAE ‘has always been a committed member’ of OPEC+.

The United Arab Emirates is the third-largest producer in OPEC after Saudi Arabia and Iraq [File: Dado Ruvic/Illustration/Reuters]

The United Arab Emirates tried to lower the temperature in a dispute with OPEC+ allies, after the country’s officials privately questioned the benefit of its membership in the oil alliance.

After a day of public silence following press reports the nation was considering its position in OPEC, Energy Minister Suhail Al-Mazrouei said Thursday the UAE “has always been a committed member.” But he did not address whether the government was assessing its future in the group.

“We have demonstrated this commitment through our compliance to the current OPEC+ agreement,” Al-Mazrouei said in a short statement, much of it written in the past tense. “As a reliable and long-standing member of OPEC, we have always been open and transparent in all our decisions and strategies in support of OPEC.”

The UAE — the biggest producer in the Organization of Petroleum Exporting Countries after Saudi Arabia and Iraq — has not said publicly it’s debating its membership, let alone planning to exit. And officials briefed the media on Wednesday under condition they would not be named, allowing room for maneuver if they want to distance themselves from such comments.

Tension between Riyadh and Abu Dhabi has grown since late summer, when the UAE breached its OPEC+ output quota and got a stern warning from its larger neighbor. Emirati policy makers seem increasingly frustrated by what they see as an unfair allocation of production caps and as the UAE economy reels from shriveling oil revenue and the coronavirus pandemic.

It comes at a delicate moment for OPEC+, a partnership between OPEC and other exporters such as Russia. It propped up oil prices with an historic agreement in April to cut supply and offset the pandemic’s impact on demand. Any cracks in the alliance — let alone push-back from a producer as big as the UAE — would undermine an already fragile market.

Brent crude fell 0.2% to $44.27 a barrel as of 1:30 p.m. in London. The benchmark has more than doubled since OPEC+ struck its deal, but is still down 33% this year.

The dissent is unusual. The UAE has long avoided public clashes, preferring to solve disputes quietly behind closed doors. It’s unclear whether the private comments were designed to force a negotiation over output levels with OPEC+’s leaders Saudi Arabia and Russia, or if they represent a genuine policy debate. Any decision to leave OPEC would need the approval of Mohammed bin Zayed, the UAE’s de factor ruler and Abu Dhabi’s crown prince.

Next Meeting

OPEC+ is meant to decide at its next meeting on Nov. 30-Dec. 1 whether to go ahead with a January production increase as set out in the April agreement, or delay it. So far, Riyadh and Moscow have signaled they are prepared to delay the hike as the virus continues to sap demand for energy.

This week, a panel of OPEC+ ministers said the group needed to be cautious despite a rally in oil prices. “All participating countries need to be vigilant, proactive and be prepared to act, when necessary, to the requirements of the market,” the panel said in a statement.

Al-Mazrouei, the UAE’s energy minister, sounded more circumspect and took a line unusually distant from that of Saudi Arabia. He said everyone must first be convinced of the need to delay the production increase.

Oil rose to its highest since early September on Wednesday on further signs of stronger demand in China, India and other Asian nations, and with pharmaceutical companies making progress on Covid-19 vaccines.

“I think there will be a livelier discussion and more uncertainty about whether ministers will agree” to an extension of current output levels, said Bob McNally, president of consultant Rapidan Energy Group and a former White House official.

Al-Mazrouei also insisted that straggling producers should implement unfinished supply cuts — possibly a barb related to the public rebuke he received from the kingdom in the summer, after the UAE flouted its own commitments. Saudi Arabia has also said that all members, collectively, need to keep to their pledges.

The UAE’s daily crude output is capped at 2.59 million barrels until the end of the year, after which it’ll rise to 2.74 million if OPEC+ opts against a delay. The country pumped 3.4 million barrels daily in March, a monthly record, and has the capacity to produce around 4 million each day.

The lead-ups to OPEC meetings often feature last-minute dramas, and this tussle may dissipate, as others have before. But cracks emerging in a key partnership would be an alarming development for the cartel.

Source: Bloomberg


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