Conditions ripe for Opec+ to keep raising output: UAE

UAE energy minister Suhail al-Mazrouei feels market conditions are ripe for the Opec+ group to sanction a further 400,000 b/d output increase in November when it meets early next month.

"Yes, I think if things move as they are - of course that is a group decision, not a single country decision - but I don't see any reason why we should not continue with the plan," al-Mazrouei said at the Gastech event in Dubai today.

Opec and its non-Opec partners - known collectively as Opec+ - agreed a roadmap in July to raise production by 400,000 b/d each month from August to April 2022, and then by 432,000 b/d from May onwards until the group has brought back all the output it cut back in April 2020 in response to the Covid-19-induced slump in global oil demand.

But the increases must be confirmed by the group at what have now become monthly ministerial meetings, and can be paused for up to three months if market fundamentals warrant it.

"The plan is working. We are doing our part, and the more easing we see of the [Covid-19] pandemic measures, the more demand we will have. And if there is demand, we will definitely be up to increase production as the market requires," he said.

This is in line with the group's own forecasts which see markets staying tight through to the end of the year, before flipping into surplus in 2022.

Opec+ has previously cautioned that as the cuts continue to unwind and collective quotas rise, some countries in the group may struggle to deliver on their quotas because of stalled or declining capacity, so the monthly increments could fall short of the intended 400,000 b/d.

Nigeria's production fell, for example, by 40,000 b/d in August to a seven-month low of 1.34mn b/d, according to Argus estimates, as a result of infrastructural and operational difficulties.

But al-Mazrouei said this should not be a cause for concern as there is enough spare capacity in the group to make up for those volumes, if needed.

"I think we have ample volumes [in the group] that we can bring to the market when they are required. That's why we are meeting every month, to attend to the changing dynamics of the market," al-Mazrouei said.

"I'm not worried," he said. "I think some countries have significant reserves of production - or differential between capacity and their actual production. And if required the group will ask those countries to bring those volumes… we are targeting balance, and I'm very optimistic the group will achieve the balance."

By Nader Itayim