UAE energy minister says Opec cuts are not about price

12 January 2017

Oil exporters agreed to cut output by 1.2 millions barrels a-day in November

UAE Energy Minister Suhail al-Mazroui has denied that Opec’s production cut of 1.2 million barrels a-day (b/d) for first six months of 2017 was to manipulate price.

“Fixing the market for a price, is not a strategy that everyone supports in Opec. Fixing the price is not going to work, because you’re not alone in the market. If you fix the price through curtailment, someone will increase the production and they will beat you and you will end up cutting. What helps is a healthy competition,” said Al-Mazroui at the Gulf Intelligence UAE Energy Forum in Abu Dhabi on 11 January.

Opec members agreed in November 2016 agreed to lower production, with non-Opec members also expected to slash production by 558,000 b/d.

Kuwait, Saudi Arabia as well as non-Opec Oman have already announced compliance with cuts in January.

Opec had in 2014 adopted a policy of non-intervention in oil markets when prices plunged nearly 40 per cent from $100 levels seen earlier in the year.

The decision to cut in 2016 was motivated by the need to ensure that investment levels in the energy industry did not suffer further decline, added Al-Mazroui.

“If we were just doing it for the price, I would tell you that we would have waited six months, then you have a huge level of production that is leaving the market because you cannot sustain it,” he said.

“This cut is to help the market stabilise. It is not about curtailment of production to help the market achieve a certain price. Some of the investors were discouraged to invest at the level of $50. People are not talking about this, how many jobs have been lost in services - 500,000 jobs, that’s a lot,” he added.

Al-Mazroui also denied that Opec producers had a specific price targeted for 2017.

“I would never quote the price, because I truly don’t believe that we should target the price, because if we target the price, then we are a cartel and we are not a cartel,” he said.

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