UAE says no to unilateral production rise, defends OPEC cohesion

The UAE will not act unilaterally to raise crude production without OPEC+ consensus, energy minister Suhail al-Mazrouei said in a March 28 interview, dismissing criticism from the International Energy Agency and others that it was sitting on its spare output capacity to the detriment of the world economy.

OPEC+ ministers are set to meet March 31 to decide on May production levels at a time when the IEA has called on the coalition to boost its output beyond the 400,000 b/d monthly increases that have been implemented since August.

Only the UAE and Saudi Arabia are able to substantially hike production within the OPEC+ alliance, but Mazrouei said that acting alone would break the group's longstanding production accord that has largely been successful over the past five years in stabilizing the market.

"First of all, I don't care what the IEA or others say. We are part of an organization, an alliance called OPEC+," he told S&P Global Commodity Insights on the sidelines of the Atlantic Council's Global Energy Forum in Dubai. "We have to do things as required by supply and demand. So I would say we are going to do whatever we can as a group, not as individual countries, and we will give you that verdict in two days."

OPEC relations with western consuming countries have deteriorated as oil prices have risen in recent months, exacerbated by the Ukraine war.

With the global market facing an estimated 2.5 million b/d supply shortfall as a result of the Ukraine war, IEA Executive Director Fatih Birol has said OPEC+ countries should prove themselves as "responsible players in the energy markets."

He added that the market was "really disappointed" by the alliance's lack of urgency to ease the market's tightness and that OPEC+ countries were underproducing their production targets.

UAE ambassador to the US, Yousef al-Otaiba, had raised hopes among consumers by saying March 9 that the country "will be encouraging OPEC to consider higher production levels," following a high-level call between Emirati and American diplomats, but Mazrouei later tempered expectations, saying the country was still supportive of the bloc's alliance with Russia.

Mazrouei acknowledged that OPEC+ members had lost about 1 million b/d of production capacity over the last year due to natural declines. UAE crude production capacity stood at about 4.2 million b/d, roughly 1.2 million b/d above its current output, meaning the country could singlehandedly offset the depletions of its OPEC+ counterparts.

But the minister said the alliance closely tracks supply and demand in deciding its production policy. OPEC was experiencing whiplash from the IEA's climate advocacy, which ministers have said is scaring off needed investment in fossil fuels, and now urgent appeals for more oil and gas, he added.

"We trust [our] numbers, more than we trust the numbers of some other organization that is changing their mind every six months," Mazrouei said.

No US outreach

The UAE minister also blasted the US for pressuring OPEC while it imposes sanctions on Russia.

He said US Energy Secretary Jennifer Granholm has never reached out with a phone call, adding that the Biden Administration was not engaging with OPEC in any constructive fashion.

"She didn't call me. She didn't approach me," Mazrouei said in a televised interview with CNBC. "And if she wanted to call, she's always going to be welcome. I would not say no. I speak with everyone. ... We have much more in common with the United States but that doesn't mean we would have to agree on everything. We would agree on the things that we think we can agree on."

US Secretary of State Antony Blinken is scheduled to meet with Abu Dhabi Crown Prince Mohammed bin Zayed in Morocco in the coming days, where the discussions are to include the state of global energy markets, US officials said.

Amos Hochstein, the US' top energy envoy, told the Atlantic Council forum that the US did not have any specific ask of OPEC+ ministers ahead of their meeting.

"As they come to their meeting on Thursday they will do what they see as the right thing to do," he said. "I think that everybody at OPEC is well familiar with the market and knows" about the current shortage.

Earlier, Mazrouei told the Atlantic Council forum that Russia was too critical of a global oil supplier for OPEC to abandon its alliance with Moscow, emphasizing the need to keep politics out of the group's production plans.

The Ukraine war has put OPEC's formal ties with Russia, which began in 2017, in the crosshairs, and ministers have so far stood by Moscow, unwilling to jeopardize a relationship that has now extended beyond oil to include security and trade.

Russia is one of the top three crude producers in the world, pumping 10.11 million b/d in February, according to the latest Platts survey of OPEC+ output by S&P Global Commodity Insights. That put it just behind Saudi Arabia as the group's biggest producer.

"Russia is an important member, and leaving the politics aside, that volume is needed today unless someone is willing to create 10 million b/d," Mazrouei said. "We don't see that someone can substitute Russia."