UAE's ADNOC CEO sees oil markets tightening due to producer cuts

Abu Dhabi National Oil Co, the UAE's biggest oil producer, is seeing signs that the oil market has tightened as cuts from OPEC+ and producers outside the coalition help rebalance the market, its CEO said.

"When it comes to oil, there are signs that the market has tightened in recent weeks," said Sultan al-Jaber on a webcast, according to an ADNOC statement on Friday. "The OPEC-plus agreement, voluntary cuts outside OPEC-plus plus, and production shut-ins are working together to start to rebalance the market. This will take time. As economies begin to open up, demand will follow, but the path to the next normal is not a straight line," said al-Jaber.

The 23-member OPEC+ is trimming a record 9.7 million b/d in May and June, to be followed by easing of curbs through April 2022.

Saudi Arabia, the UAE and Kuwait announced this week that they would cut an extra 1.18 million b/d in June on top of their OPEC+ commitments to support the oil market.

The UAE is pumping about 2.45 million b/d in May, down from a record 4.1 million b/d in April.

"We've been laser-focused on being one of the lowest-cost producers in the world," said al-Jaber, adding:

"And this has given us the flexibility and the resilience that we need at times like these."

Higher prices

Producers in countries outside OPEC+, such as the US and Norway, are also reducing output amid the surplus in the market.

Oil prices have risen in the past few weeks as countries across the world ease lockdowns, boosting consumption of some fuels.

The WTI June contract was trading up 1% at $27.81/b at 2216 CST time, while Brent was up 1.54% at $31.61/b.

The oil market may start to rebalance quicker than originally anticipated, with the International Energy Agency Thursday pointing to deeper crude production cuts from OPEC+, US output falling faster than expected and modest signs of improving demand.

The Paris-based agency revised up its oil demand decline forecast to 8.6 million b/d compared with a fall of 9.3 million b/d last month, as a gradual easing of COVID-19 related restrictions on mobility help consumption.

Non-OPEC cuts

The IEA estimated that non-OPEC output by April had fallen more than 3 million b/d since the start of the year and could reach 4 million b/d in June, with potentially more to come.

With the OPEC+ production cuts having come into effect on May 1, the IEA sees global supply in May down by an unprecedented 12 million b/d month on month.

The IEA estimated that crude oil output fell by as much as 630,000 b/d in April, and sees a further 1.2 million b/d decline in May. The agency predicts total US oil supply to drop 2.8 million b/d by year-end and 1.1 million b/d on average for 2020 compared with 2019, led by weakness in the Permian, the heart of the US shale industry.