UAE's energy minister affirms commitment to OPEC+ monthly increases; contradicts top diplomat

The UAE's energy minister affirmed on March 10 the Gulf state's commitment to OPEC+ monthly production increases, contradicting statements from a top diplomat that said the UAE will seek higher output from OPEC.

The UAE ambassador to the US Yousef al-Otaiba said in a March 9 statement published on the embassy website that the Gulf producer "favors production increases and will be encouraging OPEC to consider higher production levels". The statement sent oil prices tumbling. Platts Dated Brent benchmark was assessed at $129.52/b March 9, down 5.9% on the day, S&P Global Commodity Insights data showed.

"The UAE believes in the value OPEC+ brings to the oil market," UAE energy minister Suhail al-Mazrouei said on twitter March 10. "The UAE is committed to the OPEC+ agreement and its existing monthly production adjustment mechanism."

The OPEC+ alliance, which is scheduled to meet March 31 to decide on May output levels, has been increasing monthly output by 400,000 b/d since August 2021 and agreed in a March 2 meeting to maintain the modest uptick in production quotas for April.

The OPEC+ decision to stay the course raised the ire of oil consumers, who have called on the group, which is led by Saudi Arabia and Russia, to boost output beyond the planned 400,000 b/d increase per month to temper 14-year high oil prices.

Well-balance market

The OPEC+ producer refused in its March 2 meeting to budge from its strategy of drip-feeding 400,000 b/d of production in monthly increments back to the market, saying that it saw supply-demand fundamentals as "well-balanced."

As recently as March 7, OPEC Secretary-General Mohammed Barkindo told reporters at the CERAWeek by S&P Global energy conference that the group was planning to "stay the course" on its production policy.

Otaiba is the top overseas diplomat in OPEC's third largest producer and is charged with maintaining its key relationship with the administration of President Joe Biden. The March 9 statement comes a day after a high-level call between the UAE foreign minister, senior royal Abdullah bin Zayed and his US counterpart, Secretary of State Antony Blinken.

Otaiba's seemingly unusual intervention on oil policy comes amid an oil price spike, following several countries' decision to ban the import of Russian oil and many companies self-imposing restrictions on trading Russian barrels for fear of financial liability.

Spare capacity

The UAE, along with Saudi Arabia, are the group's only producers with more than sufficient available spare capacity to help ease prices and make up for gaps caused by new bans imposed on Russian oil imports in countries like the US and UK in response to the invasion of Ukraine.

According to the latest S&P Global survey of OPEC output, the UAE produced 2.95 million b/d in February, just under its quota.

S&P Global analysts estimate that by May, Saudi Arabia will hold just under 1 million b/d of additional production upside, while the UAE will hold about 755,000 b/d. Every other OPEC member will have effectively maxed out, with several plagued by severe instability in their oil production.

Iraq echoed Mazrouei's statements on monthly OPEC+ production quota increases, with the state oil marketer saying the planned uptick is adequate.

Required investments

"Iraq believes that the level of oil exports supplied to the global market [is] proportionate to the level of the world consumption and demand," State Oil Marketing Organization said in a March 9 statement. "In addition, the OPEC+ scheduled increases in crude oil production are enough to cover any shortage in oil supplies."

Iraq, OPEC's second biggest producer, said its ability to boost oil exports and production depend on the influx of investments.

The country has struggled for the past couple of months to ramp up output to its earmarked quota, exacerbating OPEC's inability to meet its monthly production quota increases.

"It is worth mentioning that Iraq has an additional production and export capacities by 6%, but these capacities need investment in order to provide them to the world market," SOMO added.

Iraq kept its output in February at 4.26 million b/d, stable from the previous month, but still below its 4.325 million b/d quota, according to the latest S&P Global OPEC+ survey.