UAE, Kuwait see no reason to change Opec+ plan

Mideast Gulf allies the UAE and Kuwait today again pushed back against calls on Opec and its non-Opec partners to boost crude production more aggressively to help curb rising oil prices, saying their plan to raise collective output by 400,000 b/d each month is backed by the fundamentals.

Speaking at the Adipec oil and gas exhibition, UAE energy minister Suhail al-Mazrouei said although "we have a shortage now," if Opec+ goes ahead with the 400,000 b/d as planned, all of the "six independent sources" that the Opec secretariat uses to base its own analysis and forecasts on say that the market will be in surplus from the first quarter of 2022, and that inventories will again begin to build.

At the start of this month Opec+ snubbed calls from major consuming countries, most notably the US, for a faster increase in production.

"We have been receiving calls from many countries regarding the pace [of the returning output]," al-Mazrouei said. "Of course, the US is an ally, and their opinion is important.

"But this is not the decision of one country," he said. "This is a decision of 20-plus countries. And we need to be convincing. And the only way of being convincing is to use the data.

"This is a technical organization, not a political one," he said. "And in order to be disciplined, we have to get the data and look at the fundamentals."

The Opec+ group is three months into a deal to restore the production it took off the market in April last year in response to the Covid-19-induced collapse in demand. The plan envisages monthly rises of 400,000 b/d until April 2022, and then of 432,000 b/d every month until the 9.7mn b/d it originally cut from the market is returned.

But the group is repeatedly failing to produce at its targeted level, with a 690,000 b/d undershoot in October meaning its output has averaged more than 750,000 b/d below its agreed targets this year. And while Opec+ has a compensation scheme imposing additional cuts for countries that produce above target, it does not for those who fail to meet that mark. Saudi energy minister Prince Abdulaziz bin Salman has said that while Opec+ cuts are a commitment, each country has a "sovereign right" to produce what it wants up to its target.

Kuwait's oil minister Muhammed Abdul Latif al-Fares, who was also at Adipec, today concurred with his Saudi counterpart.

"Imagine on the other side, if you infringe on their sovereignty and in these meetings, some of them do veto such discussion, that is going to bring not 400,000 b/d to the market, but zero to the market," he said, adding the 400,000 b/d Opec+ has agreed to return to the market each month is "more than enough", based on the analysis.

"It is almost impossible to convince the countries to go against this technical logic of all the independent sources, plus Opec, to do something different," al-Mazrouei said. "We need not to panic. But to relax… and act upon the facts, not the spike [in prices] that happened."

By Nader Itayim