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Opec to remain central bank of oil: UAE minister

Dubai - UAE's Energy Minister stressed that there is no intention to dismantle the organisation.

The UAE's Energy Minister on Monday warned that the world will face chaos if Opec is dismantled and blamed current volatility in oil prices to geopolitical issues, global trade war concerns and currency fluctuations.
Speaking at a panel discussion on the first day of Adipec 2018 in Abu Dhabi, Suhail bin Mohammed Faraj Faris Al Mazrouei said it is not the first time that people have raised the issue of Opec's existence and this was highlighted previously in 1970s and 1980s, too.
"Opec has evolved a lot over the years; if it were not a good and well-behaved organisation, I doubt it would have stayed this long. Without us (Opec), it is going to be way hard to come up with investments in energy sector and it will be chaotic. We have seen this chaos in certain place. Sometime we cut production to ensure that market is not oversupplied; we do more investments and keep those capacities for the day when the world calls on us to supply more crude," Al Mazroui said.
He stressed that there is no intention to dismantle the organisation. In fact, he said the possibility is that some friendly countries may join and the group will become bigger.
"It is a naïve to say that you can just get rid of Opec; things will be worse is Opec is not there," he said.
Oil prices climbed by more than 1 per cent on Monday following Saudi move to cut its crude export by 500,000 barrels a day in December due to seasonal lower demand, taking the lead in Opec to counter the price rout.
Brent crude futures rose 80 cents on the day to $70.98 a barrel by 1205GMT, while US crude futures rose 36 cents to $60.69 a barrel.
Opec to dominate
Khalid Al Falih, Energy Minister, Saudi Arabia, earlier denied there is any plan to break up Opec and the group will remain the global central bank for oil for a long time.
The Wall Street Journal on Thursday reported that a Saudi Arabia-backed think-tank is studying effects of Opec breakup on oil markets.
"Opec is essential for the stability of oil markets," he said, adding that the think-tank was just trying "to think outside the box" and analyse all scenarios but added that Riyadh has "no consideration whatsoever to eliminate Opec."
Indian Oil Minister Dharmendra Pradhan said their experience with Opec is very good.
"Gone were the days of 1970s when these things used to be discussed; Opec is no more oil producing club but now they also look into interests of consumers. Opec is accommodative of our view," Pradhan said during panel discussion.
Need for 1mbpd cut
Al Falih said that as per technical analysis there is a need to cut oil supply by 1 million barrels a day as demand will dwindle amidst slow down expected in global economy. This will also help balance the supply-demand equilibrium.
Saudi minister had announced on Thursday that Riyadh will reduce supply 0.5 million barrels a day in December.
"If all things remain equal, and they almost certainly will not as things will change, then the technical analysis we saw yesterday showed that there is need to reduce supply from October levels of a million barrels," Falih said.
"The consensus is that we need to do whatever it takes to balance the market. If that means trimming supplies by a million (bpd), we will."
Oil price
Al Mazroui blamed geopolitical issues, trade war concerns and currency fluctuation for the volatility in the oil prices.
"Oil price fluctuation is a result of market circumstances and other conditions outside the remit of our industry such as geopolitical challenges and global trade war risks. We need to create market conditions that to make it a win-win situation for producers and consumers. We want to enable world economic growth to be healthy," Al Mazroui said.
"Sometime the markets overreact and we cannot control the actions or decisions taken by heads of state. So we will continue doing our part and keep Opec together," he said, adding that Opec is not an organization that is greedy and is targeting certain price but targeting market balance.
He warned that when oil prices are too low than producing nations stop investing in energy sector as was the case in 2014-15 when oil prices had dropped sharply.
"We saw trillion of dollars of investments shying away due to very low oil prices."
- waheedabbas@khaleejtimes.com