UAE says 1.2m barrel-per-day reduction 'enough' to balance market

UAE Energy Minister Suhail Al Mazroui's comments follow Vienna meeting, where reduction was agreed
UAE says 1.2m barrel-per-day reduction 'enough' to balance market
UAE Oil Minister Suhail Mohamed al-Mazrouei. (ADRIAN DENNIS/AFP/Getty Images)
By Bernd Debusmann Jr
Wed 09 Jan 2019 03:00 PM

A production cut of 1.2 million barrels of oil per day (mbpd) is ‘enough’ to balance the oil market, according to UAE Energy Minister Suhail Al Mazroui.

The Minister’s comments come just over a month after OPEC and non-OPEC member states met in Vienna, where they agreed to a reduction of 1.2 mpbd per day. Of this total, OPEC member states will reduce production by 800,000 mpbd, with the other 400,000 coming from non-OPEC countries.

“I think 1.2 is enough,” he said. “We are now seeing the correction, in December before the deal. In January, we will definitely carry out correcting the market and place it where it’s supposed to be, at the five-year average [of inventory levels].”

The minister added that “people are not looking at” the fact that production in two countries not included in the deal, Iran and Venezuela, is in decline, adding that he isn’t concerned that they might add barrels.

“Iran is not going to add production. There is no concern on extending the waivers rather than not,” he said. “The concern is the contrary, not them increasing production.”

Additionally, Al Mazroui discounted the possibility that US President Donald Trump would “allow” Iran to produce more oil in a bid to bring the price down ahead of the next American election cycle.

“Lower prices are not good for the US economy. We all know that the US today is the largest producer in the world. That is not going to happen if the price if not right,” he said. “We have seen the price descend in the fourth quarter, especially the last two months…we’ve talked to some of the producers. There is a frustration that they are not making money, but losing money.”

In his remarks, Al Mazroui said that rising shale production and the prospect of a looming trade war between the United States and China are among his top concerns in 2019.

“The largest unknown is geopolitics to me and the trade war,” he said.

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