UAE to cut oil output by more than 139,000 b/d March/April: oil minister
The UAE, which so far has exceeded its allocation under OPEC’s oil production cut deal, will meet its commitment of reducing output by 139,000 b/d in March and could go further over the next few months, with maintenance due on key fields, energy minister Suhail al-Mazrouei said Thursday.
UAE oil output in February was 2.90 million b/d, according to the latest S&P Global Platts OPEC survey, and its January and February average of 2.916 million b/d is 42,000 b/d above its quota of 2.874 million b/d.
The quota represents a 139,000 b/d drop from its October levels, as specified by the OPEC agreement.
“UAE is committed to its share of the production cut agreed with OPEC and our compliance to cut 139,000 b/d for first 6 months is happening,” Mazrouei said in a tweet Thursday. “UAE production cut for March and April will be more than 139,000 b/d due to the maintenance activities which means more than 100% compliance.”
The UAE oil fields where Abu Dhabi’s Murban and Das crude blends are produced are set to undergo maintenance in March and April, respectively.
Analysts have been at a loss to explain the UAE’s apparent production record, given that it is part of the Gulf Cooperation Council bloc that typically leads compliance on OPEC output agreements.
GCC and OPEC heavyweight Saudi Arabia, for example, has cut 140,000 b/d more than its requirement, according to the Platts survey, while Kuwait is fully compliant.
“The UAE’s output stands out,” one Paris-based commodities analyst who spoke on condition of anonymity said. “Before the deal began, I would have bet my house on full compliance with the output cuts from Abu Dhabi.”
The analyst cited a major fire at the 900,000 b/d Ruwais refining complex in January that should have helped the UAE reach its compliance level.
Saudi energy minister Khalid al-Falih said on Tuesday at the IHS CERAWeek conference in Houston the kingdom has “made it clear” to its fellow OPEC members, along with 13 non-OPEC members that have also signed up to the deal, it will not bear the burden of output cuts alone.
“This [agreement] is to the benefit of all and needs to be achieved by the contributions of all,” he said.
Mazrouei, defended the UAE’s compliance record for the first two months of the year in an televised interview with CNBC on the sidelines of the IHS CERAweek conference, saying that according to his own statistics, the UAE cut output by about 105% of its requirement.
“For the first month, our compliance was a little bit below 139,000 b/d, at 11,000 b/d and the second month of the year our compliance has been more than [that, at] around 105%”, he said.
“The forecast [cut] for the next couple of months, including March, since we have maintenance shutdowns, is going to is going to definitely be in the range of 170,000 b/d to 200,000 b/d,” Mazrouei added.
If it succeeds in cutting output by 200,000 b/d from October levels, the baseline for the OPEC deal, UAE production would be around 2.81 million b/d. In a notice to lifters Thursday, state-owned Abu Dhabi National Oil Co., or ADNOC, announced a cut to its nominated loadings for March and April.
Upper Zakum allocations will be cut by 5% in March. Upper Zakum loadings will also be cut by 3% in April, while Murban and Das crude allocations have been slashed by 5%.
The minister said he was confident compliance would not be an issue over the six months of the OPEC deal, and questioned the use of secondary sources for assessing OPEC member’s crude output.
“One thing that we always had a difference in view [with] is the [secondary] sources that we use,” he said.
The Platts survey is one of six secondary sources used by OPEC to monitor adherence to the deal. OPEC agreed to use the secondary sources, over the objections of some members, as experts have said the surveys are independent and not prone to political manipulation, as some country-supplied figures are.
OPEC pledged November 30 to cut some 1.2 million b/d from October levels and freeze production at 32.5 million b/d over January to June, including Indonesia, which suspended its membership but is still counted towards the ceiling.
The organization was joined in December by a number of non-OPEC producers, including Russia which said it would cut output by 300,000 b/d. A five-country monitoring committee meets March 25-26 in Kuwait to determine compliance and discuss potential next steps.
Extending the six month OPEC deal would depend on three factors, Mazrouei said — a visible draw down in historic high crude storage levels, price appreciation, and the amount of output cut from shale oil producers.
OPEC has been quick to tout the high compliance to the deal among the 10 members obligated to cut production. The Platts survey found that those 10 members achieved 98.5% of their required cuts through the first two months of the deal.
But in terms of the overall ceiling, OPEC is producing some 340,000 b/d above 32.5 million b/d, when Indonesia is included, the Platts survey found.