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UAE rules out supply hike as US-led group set to release oil from reserves

The White House said on Tuesday that the US would release 50 million barrels of crude from strategic reserves.

The UAE on Tuesday ruled out pumping more crude as several energy consumer nations led by the US prepared to release oil from their strategic stockpiles in a bid to lower prices.

The UAE Energy Minister Suhail Al Mazrouei said he saw no logic in supplying more oil to global markets when all indicators pointed to a supply surplus in the first quarter of next year.

The minister described it as a “state matter” coordinated moves by the US, India, China, Japan, Britain and South Korea to release crude oil from their strategic reserves to cool prices after Opec+ producers repeatedly ignored calls for more crude supply.

“We are looking at all technical data and all of them are suggesting we are having a surplus in the first quarter so there is no logic of increasing our contribution,” he said, adding there should also be no supply worries in the second quarter.

The minister said the Organisation of the Petroleum Exporting Countries and its allies, known as Opec+, would meet on December 2 and base decisions on “balance of supply and demand.”

The group, which includes Russia, has resisted requests from Washington and other consumer nations for swifter hikes, sticking to its plan of gradually raising output by 400,000 barrels per day (bpd) each month since August.

The White House said on Tuesday that the US would release 50 million barrels of crude from strategic reserves.

“I think the actions from countries to bring back some of their reserves is a state matter and they don’t consult with us when they increase their Strategic Petroleum Reserves or decrease it,” Mazrouei said.

The minister earlier told a business event at the Expo 2020 world fair in Dubai that the UAE has started building “the first green hydrogen plant in the Middle East” with testing currently underway. He gave no further details.

The UAE has announced plans to reach net-zero emissions by 2050, and has said it would oversee Dh600 billion in investment in renewable energy. The UAE aims to capture 25 per cent of the global hydrogen fuel market by 2030.

The announcement that the US along with other consumer nations would release crude from their reserves was made to help drive down oil prices from near three-year highs. It was the first time that Washington had coordinated such a move with some of the world’s largest oil consumers, officials said.

The release from the US reserve would be in a loan and a sale to companies, US officials said. The 32 million barrels’ loan will take place over the next several months, while the administration would accelerate a release of 18 million barrels in sales already approved by Congress.

“We will continue talking to international partners on this issue. The president stands ready to take additional action if needed, and is prepared to use his full authorities working in coordination with the rest of the world,” a senior US administration official said.

India said in a statement it would release five million barrels. South Korea said it had agreed to participate but did not give volumes. Japanese media said Tokyo would announce its plans on Wednesday. Britain had no immediate comment.

Global benchmark Brent crude was trading around $80 a barrel on Tuesday, above where it was trading before the announcement but well off last month’s three-year high of more than $86. West Texas Intermediate (WTI) crude futures were up 22 cents, or 0.29 per cent, at $76.97.

Market analysts said the effect of releasing supply from reserves on prices is likely to be short-lived after years of declining investment and a strong global recovery from the Covid-19 pandemic.

The US said the release of crude from reserves will start hitting the market in mid to late December.

“This is more than suggested by sources before,” said Commerzbank analyst Carsten Fritsch, describing the US release as “quite significant”.

“The question is the time horizon of the release and how Opec+ will react,” he said.

Although the 50-million-barrel release by the US was above market expectations, 18 million barrels had already been planned for sale, said UBS analyst Giovanni Staunovo.

“Big headline number but the details provide a less strong narrative,” Staunovo said.

“SPR releases are a tool used to cover temporary production disruptions and are not useful to fix imbalances caused by lack of investment and still rising demand,” he said. — issacjohn@khaleejtimes.com