UAE energy minister Suhail al-Mazrouei on Sunday downplayed the possibility of deeper OPEC production cuts as a key ministerial committee gets set to meet later this week with oil prices still struggling around $60/b.
OPEC, Russia and nine other non-OPEC allies are in the midst of a 1.2 million b/d production cut accord scheduled to run through March 2020, but there has been market speculation that the group could consider larger supply curbs.
"I wouldn't suggest we jump into cuts when we have an issue in trade tensions," Mazrouei said in a press briefing ahead of the World Energy Congress, which begins Monday in Abu Dhabi. The OPEC/non-OPEC Joint Ministerial Monitoring Committee, on which Mazrouei sits, is scheduled to meet Thursday on the sidelines of the WEC.
"Oil market is not only affected by supply and demand, it's the main thing we can control, but there are geopolitical effects, concerns about trade tension especially between major economies like US and China."
The US and China have been engaged in a tariff tit-for-tat, leading many economists to downgrade their forecasts for global economic growth and oil demand.
"If trade tensions escalate further, oil demand growth may soften even more, requiring much lower prices,” Giovanni Staunovo, an analyst for investment bank UBS, said in a note on Friday. "On the other hand, unexpected supply disruptions in the Middle East or a surprise production cut by OPEC and its allies may push oil prices higher.”
Oil prices are some $10/b below where supply-and-demand fundamentals suggest they should be, according to some analysts, who cite the OPEC/non-OPEC cuts and US sanctions on OPEC members Iran and Venezuela for tightening the market.
The nine-country JMMC, co-chaired by Saudi Arabia and Russia, is tasked with monitoring market conditions, assessing compliance with production quotas, and making policy recommendations to the wider coalition, whose next full meeting is December 5-6 in Vienna.
OPEC crude production edged higher by 50,000 b/d in August to 29.93 million b/d, according to the latest S&P Global Platts survey, but the bloc's compliance with its committed cuts remains healthy at 103%.
The UAE, OPEC's third largest producer, pumped 3.07 million b/d in August, the survey found, in line with its production quota under the deal. Mazrouei said at the press briefing in Abu Dhabi that the country "is totally committed to meeting and even exceeding its commitment.”
Saudi Arabia early Sunday sacked its energy minister, Khalid al-Falih, who had been OPEC's leading voice on the cut accord, and replaced him with Prince Abdulaziz bin Salman, a longtime oil veteran and half-brother of powerful Crown Prince Mohammed bin Salman. Falih had been energy minister since 2016 and many OPEC watchers expect no change to Saudi Arabia's engagement with OPEC.
"I expect a continuation of oil policy with closer cooperation with OPEC and non-OPEC but with a different management style," said Bassam Fattouh, director of the Oxford Institute of Energy Studies, noting that Prince Abdulaziz played a key role in negotiating a 1997-98 OPEC/non-OPEC supply accord and in managing the sharp price swings during the financial crisis of 2008.
The prince serves on the OIES board of governors.
Mazrouei said the prince's longstanding presence on Saudi Arabia's OPEC delegation would make any transition easy for the group.
"I would argue he is one of the oldest contributors and has been there for more than 30 years," Mazrouei said. "I am sure he will do a great job and continue to do a great job like his predecessor, Minister Falih."
