The global oversupply of crude will decline this year even after Iran adds an expected 500,000 barrels a day in oil output, UAE Energy Minister Suhail Al Mazrouei said.
Oil prices are fluctuating on speculation about the potential impact of more Iranian crude entering the market this year after the lifting of economic sanctions, Al Mazrouei said on his Twitter account. Iran has pledged to boost output by 500,000 barrels a day immediately after the sanctions are removed and by up to 1 million a day within a year.
“Iran’s possible production increase of 500,000 barrels a day this year won’t be enough to meet the expected demand,” Al Mazrouei said. “It’s difficult to see from where the new oil supply is coming from this year to fill the expected annual demand increase of at least 1.3 million barrels a day.”
The UAE and fellow members of the Organisation of Petroleum Exporting Countries decided in December to abandon their production ceiling, effectively allowing the group’s producers to pump as much as they can. OPEC boosted output to 32.9 million barrels a day last month and exceeded its previous 30 million-barrel-a-day target every month since May 2014 as it battles for market share with higher-cost suppliers outside the group. Benchmark Brent crude fell for a third year in 2015 and a further 15 percent this year amid the global glut.
“Amid current prices, we should not ignore the possibility of a larger decrease in production from countries outside OPEC that are currently incurring losses,” he said. “The fluctuations in prices in the market are not linked to supply and demand, but are driven by speculators and their concern about the impact of a production increase by Iran.”
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