The UAE’s energy minister said the oil price slump could encourage global economic growth as prices dipped to below $50 a barrel.
Suhail Al Mazrouei told The National newspaper that a strengthened global economy could then drive demand upward and thus stabilise the oil market.
“We are experiencing an obvious oversupply in the market that needs time to be absorbed,” Mazrouei said.
“Depending on the actual production growth from non-OPEC countries this problem could take months or years [to be resolved]. If they act rationally we can see positive corrections during 2015.
“Also the current oil prices could encourage world economic growth higher than the expected, which could drive demand upward,” he added.
In November the Organisation of Petroleum Exporting Countries (OPEC), which the UAE is a member of, decided to keep production targets unchanged to 30mn barrels of oil per day (bpd). The group said it expects to see a global demand of 28.9mn bpd this year.
The price of Brent crude, a global price benchmark, has dropped 48% since its peak time last year.
Yesterday it was down to $52.30 a barrel at 7.30pm in Abu Dhabi, while Oman DME, the Asian oil pricing benchmark, closed even lower at $49.39 a barrel.
Crude prices have plummeted amid high shale oil production in the US and slow global economy.
End of last week Iraq, the second-largest OPEC producer after Saudi Arabia, and non-Opec member Russia reported the highest production levels in decades.
By 2017 the UAE has set a target to boost production from its current 3mn bpd to 3.5mn bpd despite lower oil prices and global oversupply.
“Most of the projects are committed and under construction, and we don’t foresee any delays on the capacity expansion,” the energy minister said.
“But building capacity is something and using it is something else. We will always be wise and considerate of the world supply and demand.”
“The oil and gas industry in the UAE is well developed and as a mature producer, we are not going to change our plans due to price fluctuation,” Mazrouei added.
“We have dealt with such fluctuation in the past and we will not panic this time. There is a world demand increase on crude oil and especially our crude, and we believe the market will stabilise itself eventually,” he said.
