Oil & Gas

Without Opec+ ‘we would be in chaos’, says UAE minister

October 2, 2024, 10:34 AM

Suhail Al Mazrouei, the UAE's energy minister, says he expects a large part of oil demand growth to come from the Global South

Opec+ doing a ‘noble’ job
Fears of war push up prices
Saudis voice production concerns

Opec+ is doing a “noble” job of balancing supply and demand in the oil market, the UAE energy minister has said.

“Without this group, we would be in chaos,” Suhail Al Mazrouei told a conference on Wednesday.

“Opec+ has sacrificed more than others,” the minister said, adding that although the energy group’s members do not produce the majority of oil in the world, “the point is that the group is stable”.

Brent traded at $75.27 a barrel on Wednesday, rising 2 percent on the previous close, a day after Iran fired around 180 missiles at Israel, sparking fears of a wider regional conflict.

The Wall Street Journal reported on Wednesday that Prince Abdulaziz bin Salman, the oil minister of Saudi Arabia, said last week that oil prices could drop to as low as $50 per barrel if Opec+ members do not stick to production limits.

The bloc – which is made up of the Organisation of the Petroleum Exporting Countries and allies led by Russia – is holding back nearly 6 million barrels per day of output. It has delayed a plan to partially undo the output cuts until December 1, in an attempt to keep oil prices stable.

However, keeping these barrels off the market has led to rising tensions among members. Iraq, Kazakhstan and Russia have been identified as non-compliant with cuts.

Other members, including the UAE, are investing to increase production capacity and are keen to see their quotas increase.

The group’s share of global production fell from 35 percent last year to 32 percent in July, as non-Opec output increases.

Opec+ is set to hold an online joint ministerial monitoring committee meeting on Wednesday. However, observers have told AGBI they do not expect any changes to group policy in the short term.

Falling oil prices and the lack of compliance from Opec+ members have prompted Saudi Arabia to threaten that it will reclaim market share and give up its unofficial $100 a barrel target.

The kingdom needs an average of $96 a barrel to finance its Vision 2030 economic reforms and giga-projects, according to the IMF.

Oil prices have fallen by 20 percent this year, despite escalating geopolitical tensions in the region. China’s slowing oil demand and rising output from countries including Brazil, Guyana, Canada and the US are putting downward pressure on the market.

The UAE’s energy minister said it is difficult to predict China’s demand over the next 20 years, but he expects a large part of oil demand growth will come from the Global South.

“My worry is supply, as huge infrastructures need to be replaced,” Mazrouei said. “The level of investments is insufficient to fulfil demand in the short and long term.”