UAE Energy Minister Defends Opec-Plus Cut

Opec-plus oil producers continued to argue on Tuesday that politics played no role in their recent decision to cut output, with the United Arab Emirates' energy minister describing it as a "technical" move that had succeeded in stabilizing prices.

"We are against the rumors that this is political. … We always meet and discuss the facts and how we can all contribute to taking the right measures to balance the supply and demand," the UAE's Suhail al-Mazrouei told a news conference in Abu Dhabi.

Opec-plus on Oct. 5 agreed to lower its targeted production by 2 million barrels per day, presenting it as a pre-emptive move to align supply with an anticipated slowdown in demand for oil amid a deteriorating outlook for the global economy

But the US responded angrily, with President Joe Biden saying that Washington will reassess its relationship between Washington and top Opec producer Saudi Arabia.

The Biden administration had previously lobbied the Saudis to increase supply, but without success.

Some US officials have suggested that the production cut amounts to support for Opec-plus member Russia as it wages war in Ukraine, adding that it will undermine US and European sanctions against Moscow.

Biden and other US politicians have also been concerned that the cut in Opec-plus crude oil supply will push up gasoline prices for US consumers who are set to vote in midterm elections on Nov. 8.

'Prices Stabilizing'

Al-Mazrouei echoed other recent Opec-plus denials that the decision had been influenced by politics, arguing that since the cut was announced, crude oil prices have stabilized at levels where they stood at the same time last year.

"Prices have been stabilizing, and actually if you look at October 2021, before anything, before all the crises, the geopolitical ones, you would see we are in the same price environment," he said.

Brent crude futures traded in the mid-$80s per barrel in October of last year. On Tuesday they closed just a few cents above $90, after giving up some of the recent gains they made just before and after the Oct. 5 announcement of the production cut.

Congo's hydrocarbons minister and the current president of the Opec conference, Bruno Itoua, also spoke up on Tuesday, maintaining that the Opec-plus alliance had taken the correct course of action with the unanimous consent of its members.

"There is complete agreement among Opec-plus countries that the best approach ... during the current period of uncertainty and poor visibility, is a proactive approach, which supports market stability and provides the vision and future guidance that the market needs," Itoua said in a statement.

Capacity Concerns

In his press conference, al-Mazrouei echoed Saudi Arabia's concern that a lack of upstream investment has left the world with insufficient spare oil production capacity to cope with supply disruptions or further growth in demand.

"Lack of stability [in energy markets] is what is driving investors not to invest," he said.

Saudi Arabia and the UAE are both working on plans to boost their production capacity, with the latter targeting an increase to 5 million b/d from current levels of around 4.3 million b/d.

Asked if the UAE plans to seek a higher production baseline that reflects those plans, al-Mazrouei said only that there is a mechanism which allows any member country to submit such a request to the Opec Secretariat.

Given the discrepancy between the UAE's current production capacity and its baseline of 3.5 million b/d — a gap that will grow as more capacity is added — the country is widely expected to raise this matter for discussion at some point.

In the meantime, however, Energy Intelligence understands that the UAE is keen to preserve unity within Opec-plus so that the alliance can manage the market effectively at a time of significant uncertainty for the global economy and oil demand.