Why UAE in no rush to change OPEC oil target?

The United Arab Emirates is in no hurry to see Opec cut its oil output target this year despite the sharp drop of global crude prices in the last few months, senior UAE energy officials indicated yesterday.

Last week, Opec Secretary-general Abdullah al-Badri said he expected the group to lower its output target when it meets in late November.

But yesterday, United Arab Emirates Oil Minister Suhail bin Mohammed al-Mazroui said in one of the first public responses by a senior Gulf oil official to Badri’s comments: “It is premature to decide – we (will) meet to discuss and agree on measures.

“We still have two months to monitor. Once we meet we will make sure our supply meets demand,” Mazroui told reporters in Abu Dhabi.  Matar al-Neyadi, undersecretary of the UAE’s ministry of energy, told reporters in the emirate of Fujairah later in the day: “I think the existing prices are fair.”

Current UAE oil output is “just below 3mn bpd”, and the UAE plans to raise its output capacity to 3.5mn barrels per day by 2017, Neyadi said.

Asked if he expected UAE output and exports to remain steady for the rest of this year, he replied: “I don’t think there is a change.”

Saudi Arabian Oil Minister Ali al-Naimi on Monday also seemed to downplay worries about the impact of lower oil prices. Asked by Reuters while in New York if he was concerned about the recent price declines, he said: “Why are you worried about the oil market?” He declined to comment further.

Brent crude oil is now at about $97 per barrel, near a two-year low, having dropped from a peak of almost $116 in June.  But oil is still well above levels that would start to hurt the state finances of the big Gulf Arab producers, and they have previously indicated that they will not be worried by price fluctuations which they consider short-term.

Badri was speaking last week after a meeting with Russian Energy Minister Alexander Novak. Russia is not a member of Opec, and Novak said after the meeting that Russia did not discuss any coordination on oil prices with Opec.

Mazroui also said yesterday that non-Opec producers had a responsibility towards production: “We are one-third, they are two-thirds, so they have a responsibility.” He did not elaborate.

Neyadi said in a speech yesterday that the rise of shale energy production in the US and elsewhere, which is relatively expensive compared to traditional production methods, had the effect of creating a floor for global oil prices.

“One of the impacts of shale gas is to introduce a baseline where the oil price will stay above that line,” Neyadi said, adding that the baseline was around $90 per barrel.