UAE urges new OPEC+ agreement to support oil market as output to climb

Dubai — The UAE sees a need for a new OPEC+ agreement to keep the oil market balanced, the country's energy minister said Wednesday in a tweet, as OPEC's third-largest oil producer announced plans to boost supplies in April and speed up expansion in production capacity.

"The UAE Ministry of Energy and Industry firmly believes that a new agreement is essential to support a balanced and less volatile market,” Suhail al-Mazrouei said in the tweet. "We are disappointed that no agreement was reached by OPEC + and the current declaration of cooperation will therefore expire at the end of March 2020."

OPEC+ talks to extend and deepen oil production curbs broke down last week after Russia refused to sign on to a conditional output cut proposed by Saudi-led OPEC, which had recommended reducing its output by 1 million b/d as non-OPEC allies lower production by 500,000 b/d. The breakdown of talks pushed prices on Monday to levels not seen since 2016, when the landmark alliance was formed. The declaration of cooperation was signed in December 2016, when the alliance came together after a joint OPEC and non OPEC meeting in Vienna. OPEC+ is in the last month of an agreement to trim 1.7 million b/d from global market that expires end of March.

Price war

Since the failure of last week's talks, OPEC kingpin Saudi Arabia slashed its oil selling prices for April by the most ever for some grades, said it will supply the market with 12.3 million b/d next month and announced plans to raise is maximum production capacity by 1 million b/d to 13 million b/d in what analysts are calling a price war.

The UAE has followed in the footsteps of Saudi Arabia slashing its retroactive pricing levels, boosting supplies in April and accelerating a plan to boost output capacity.

State-owned Abu Dhabi National Oil Co, the UAE's biggest producer pumping some 3 million b/d of crude, announced on Wednesday it could supply over 4 million b/d to global markets in April and said it plans to speed up its production capacity target of 5 million b/d, which was previously slated for 2030.

"Operators in the UAE have ample production capacity that will be quickly brought online given the current circumstances,” Mazrouei said in the tweet.

ADNOC has previously said it was on track to raise oil production capacity to 4 million b/d in 2020.

Russia reply

Russia, which leads the 10 non-OPEC members in the coalition, could potentially increase oil output by up to 500,000 b/d although it hasn't closed the door to further cooperation with OPEC in the future, energy minister Alexander Novak said Tuesday.

Under the existing output cuts between OPEC and non-OPEC producers, Russia's quota is 10.328 million b/d. In February, the country produced 11.38 million b/d, according to S&P Global Platts estimates.

The next meeting of OPEC and non-OPEC ministers is scheduled for May-June, he said.

As for the steep drop in prices, Novak blamed Saudi Arabia offering discounts on oil for the price crash, which "will take a few months to recover."

Meanwhile, the Kremlin did not rule out Moscow and Riyadh returning to the negotiating table and reaching a consensus on oil production cuts.