UAE backs bid to freeze oil ceiling

Photo by Dhes Handumon

 The UAE on Thursday threw its weight behind a strategic Saudi-led drive to freeze oil production ceiling in a bid to stabilise the market and prices that had plummeted more than 70 per cent since mid-2014.
Suhail bin Mohammed Faraj Al Mazrouei, the UAE Minister of Energy, said that the country supports any initiative to freeze the oil production ceiling by consensus of the members of the Organisation of Petroleum Exporting Countries (Opec) and Russia.
"We believe that freezing production levels by members of Opec and Russia will have a positive impact on balancing future demand based on the current oversupply," Al Mazrouei said in statement to Wam on Thursday.
He maintained that the current price is not suitable for everyone and it will force producers to stabilise production levels and reduce investments in higher-costing oils.
"The oil policy in the UAE is always open for cooperation with everyone in order to serve the higher interests of the producers and the balance of the market and we are still optimistic about the future," the minister said.
Al Mazrouei expressed optimism about the future of the oil market, saying that he expects the current situation to push producers to freeze current levels, if not cut production.
Following a Saudi led initiative early this week, several Opec-member countries and other producers, including Russia, Qatar and Venezuela agreed in Doha  to freeze production at last January's levels in a move to support the stability of the global oil market.  Saudi Oil Minister Ali Al Naimi said freezing production at January levels - near record highs - was an adequate measure and he hoped other producers would adopt the plan. Opec member Kuwait has since said it supports the proposal.
The UAE's backing was preceded on Wednesday by Iran's crucial endorsement for the deal by announcing that it would support an oil production ceiling despite its first post-sanction oil hitting the international markets this week. "The decision that was taken for the Opec and non-Opec members to keep their production ceiling to stabilise the market and prices for the benefit of producers and consumers, is supported by us," Iranian oil minister Bijan Zanganeh said on Wednesday.
The impact of Iranian stance was felt immediately with the international benchmark Brent crude, having hit a low of $32 a barrel on Tuesday, rose above $34 overnight and continued to move towards $35 on Thursday morning.  
Helping the upward swing was a shock drop in oil reserves in the US. The US Energy Information Administration reported stockpiles fell by 3.3 million barrels last week, compared to a consensus estimate for another build of 3.9 million barrels.
Al Mazrouei had pointed out that the global oversupply of crude would decline this year even after Iran adds an expected 500,000 barrels a day in oil output. Iran has pledged to boost output by 500,000 barrels a day immediately after the sanctions are removed and by up to one million a day within a year.
- issacjohn@khaleejtimes.com