No Saudi, UAE promises for more crude oil despite UK prime minister's trip

Saudi Arabia and the UAE on March 16 offered no public commitments to pump more oil after UK Prime Minister Boris Johnson's meetings with their crown princes, where he lobbied the OPEC members to offset the impact of Western sanctions on Russia.

The official Saudi Press Agency made no mention of oil supplies in its readout of Johnson's meeting with Crown Prince Mohammed bin Salman, and the Saudi energy ministry declined to comment.

UAE Crown Prince Mohammed bin Zayed "reiterated the UAE's call for adoption of peaceful and diplomatic means to settle various disputes, differences and issues between countries in a way that will serve regional and international security, stability and peace," the state-run WAM news agency said.

Sanctions imposed on Russia's financial sector have effectively cordoned off a significant chunk of the country's more than 7 million b/d of crude and refined product exports from European and American customers, as prices have soared, fueling record inflation in major economies.

Western powers have been scrambling for alternatives to Russian energy, with Johnson's visit to Saudi Arabia and the UAE the most visible part of a major diplomatic push.

In a statement prior to his trip, Johnson appealed to the two countries to help the world "wean itself off of Russian hydrocarbons."

"We will work with them to ensure regional security, support the humanitarian relief effort and stabilize global energy markets for the longer term," he said.

Strong ties beyond oil

But getting them to agree to pump more crude would require them to break OPEC's more-than-five-year partnership with Russia that has forged strong ties beyond oil -- an uncertain prospect as they increasingly look eastward for political allies.

"The message was UAE is committed with the OPEC+ plan," an Emirati official told S&P Global Commodities Insights on condition of anonymity.

Even before Russia's invasion of Ukraine, Saudi Arabia and the UAE had steadfastly rebuffed appeals to more aggressively raise production to cool off rising prices, preferring to remain cautious in the face of the pandemic and protect hard-earned revenue gains after the market crash of 2020.

Saudi officials have also been very careful not to be seen infringing on other OPEC+ members' market share, in particular Russia, to keep Moscow in the producer bloc's fold.

Saudi energy minister Prince Abdulaziz bin Salman participated in the meeting with Johnson, SPA reported.

The UAE had been seen a potentially more receptive to Johnson's lobbying. The country's ambassador to the US, Yousef al-Otaiba, said March 9 it "will be encouraging OPEC to consider higher production levels," following a high level call between Emirati and American diplomats.

UAE energy minister Suhail al-Mazrouei later tempered expectations, saying the country was still supportive of the OPEC's alliance with Russia, indicating it would not unilaterally raise output.

Staunch allies

Johnson's visit to Abu Dhabi and Riyadh comes two weeks ahead of the next OPEC+ meeting, scheduled for March 31, where the group will be deciding on May output levels.

Saudi Arabia and the UAE are essentially OPEC's only members with spare production capacity available to help ease the supply crunch caused by the sanctions.

S&P Global Commodity Insights estimates 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 be effectively maxed out, and several are plagued by severe instability in their oil production.

The OPEC+ alliance has been gradually easing the record production cuts it instituted during the worst of the pandemic in 400,000 b/d monthly increments -- a pace criticized by the US, India and other key customers as too slow to keep pace with rising demand, let alone the Russia sanctions.

Crude prices have fallen since hitting a 14-year high above $137/b earlier in March, but remain far above levels that consuming countries would like to see. The Platts Dated Brent benchmark was assessed at $107.96/b on March 15, up almost 60% year on year.

Downing Street said Johnson also planned to discuss the situation in Iran and Yemen with the princes, as well as increased security cooperation, trade, investment and human rights -- the last item a sore point between Saudi Arabia and Western countries, with US President Joe Biden refusing to deal with Prince Mohammed directly.

Saudi Arabia and the UAE have voiced their concerns about their longstanding geopolitical rival Iran, as talks over a nuclear deal that would relieve sanctions on Iranian oil exports have stalled.

The nuclear deal would also bring major supply relief to the market -- up to 1.5 million b/d of unlocked Iranian crude and condensate exports within a year, according to S&P Global -- but Gulf Arab countries are seeking security assurances against Iranian aggression.

Both the UAE and Saudi Arabia have been hit by missile and drone strikes from Iranian-backed Yemeni Houthi rebels, including on key oil facilities and ports. Other attacks have targeted shipping in the region.