Abu Dhabi — OPEC+ officials say they see no need to reverse their production cuts in the face of heightened geopolitical tensions in the Middle East, with UAE energy minister Suhail al-Mazrouei declaring Wednesday that the global oil market was "well-supplied."
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"I would say now we are not forecasting a shortage of supply unless we have a catastrophic escalation, which we don't see," he said at the Gulf Intelligence UAE Energy Forum in Abu Dhabi.
Fears of oil disruptions in the region have risen after a US drone strike killed top Iranian commander Qassem Soleimani in Baghdad last week, sending oil prices above $70/b for the first time since September. Iran retaliated Wednesday attacking military bases with US soldiers in Iraq, though US President Donald Trump said afterwards the US was ready to "embrace peace with all who seek it," cooling the oil market.
Mazrouei, who oversees oil production in OPEC's third largest member, said any decisions within the OPEC+ coalition to make up for lost barrels would be made collectively.
Additional coverage: US-Iran tensions
OPEC, Russia and nine other allies have entered their fourth year of production cuts aimed at propping up the oil market, with the current agreement calling for the 24-country coalition to slash 1.7 million b/d in output through March. The coalition's next scheduled meeting is March 5-6 in Vienna.
"OPEC always will meet to discuss whatever necessary actions that we need to do," Marzrouei said. "It's not going to be unilateral, it will be a group decision."
Russian energy minister Alexander Novak, speaking in Istanbul, echoed the comments.
"It's necessary to watch and monitor the situation," he said, according to Russian state news agency RIA Novosti. "We always have the possibility of meeting if there's the need for it... I, at the moment, wouldn't want to predict the situation on the market."
OPEC Secretary General Mohammed Barkindo estimated the world had some 3 million to 3.5 million b/d of spare crude production capacity that could be brought online quickly to mitigate any outage, with two-thirds in the Persian Gulf, led by Saudi Arabia.
S&P Global Platts Analytics estimates the amount of spare production capacity in the world that can be brought online quickly at 2.3 million b/d, of which 1.5 million b/d is in Saudi Arabia.
Barkindo said the current crisis was a reminder to the oil industry to continue investing upstream to prevent any supply squeezes.
"The issue of spare capacity will come to the fore if there is risk to security of supply," Barkindo said. "It is in the interest of the global economy for this industry to continue to attract predictable investments that will not only maintain the current supply to meet current demand but also to meet the growing demand and unforeseen circumstances."
Mazrouei also said that OPEC and its partners can not be counted on alone to stabilize the market. The UAE itself is boosting its crude production capacity to 4 million b/d this year, from 3 million b/d.
"If necessary, we will do as we always do: respond because we care about the world, we care about supplying the world demand, but we have limitations, as well," he said.
The minister said he does not expect the Strait of Hormuz, a key shipping chokepoint for oil and gas exports, to be closed or movements through the waterway disrupted. Iran has threatened to close the waterway if war erupts in the region.
"The Strait of Hormuz is not only important for us but it is important to the whole supply chain and Iran understands that," Mazrouei said.
Daily oil flow through the strait averaged 21 million b/d -- about 21% of global petroleum liquids consumption -- in 2018, according to the US Energy Information Administration.
In the meantime, oil demand continues to grow and the OPEC+ agreement to trim production will keep supply in check, Barkindo said. Absent a conflict in the Middle East or other unexpected disruptions, many analysts have forecast a supply surplus in the first half of the year, before the market tightens in the second half.
Barkindo called on US shale producers in particular to play a cooperative role in managing the market. The US is expected to produce an average 13.2 million b/d of crude oil in 2020, an increase of 900,000 b/d from last year, according to the US Energy Information Administration.
"We welcome the continued role of shale oil from the US, we welcome the new status of US being the biggest producer of not only crude oil but liquids," Barkindo said. "With that comes responsibility to maintain stable oil markets. OPEC alone cannot share this responsibility. We invite the US to share in this noble role and objective."
OPEC is also working with its members to improve compliance with output cuts, which for OPEC+ reached well above the target to 146% in 2019, he said. Iraq and Nigeria, which have been criticized by other members for overproducing their quotas, have promised to improve compliance.
"Countries lagging behind for domestic internal reasons are working to overcome their challenges," Barkindo said. "We are confident in the course of time they will be able to hit 100%."