The Minister of Energy urged producers that have committed to output cuts to prove their credibility by telling the market when they have followed through, according to The National.
Suhail Al Mazrouei said on Wednesday that Opec and non-Opec producers who have agreed to restrict their output over the next six months need to demonstrate that they are being implemented in order for their initiative to stabilise oil prices.
After a strong rally in oil prices following Opec’s November deal to set output quotas, followed by a commitment by Russia and some other producers to make cuts of their own, the focus has turned to monitoring that deal.
Saudi Arabia, the UAE, Kuwait and Qatar have made efforts to be transparent about their cuts, as has Oman among the non-Opec deal signatories. But there have been conflicting signals from some others.
“I would encourage them to do like we did, [Saudi] Aramco, Kuwait and some other countries. We need to communicate to the market, to our customers, and those numbers are going to be known,” he said, referring to the provision in the deal to form a monitoring committee to look at things like state oil companies’ loading schedules to ensure compliance.
“They need to become vocal about that because it is going to be monitored … We need to wait and see,” he said, answering questions on the sidelines of the Gulf Intelligence Energy Forum in Abu Dhabi.
Oil prices rose by 30% from mid-November to early this year, when North Sea Brent crude futures hit an 18-month high of $58.37 per barrel but they have since dropped as much as 8% from that level and were below $54 per barrel this week and some analysts expect another volatile year for oil prices.
Al Mazrouei said that the sharp rise in prices had come even before the deal had taken effect in January, underlining the importance of market perceptions.
“It’s not as simple as supply and demand, not as simple as geopolitics but there are many moving parts,” the minister said.
Al Mazrouei, along with a number of other oil ministers from key countries, including Saudi Arabia and Qatar, will meet today in Abu Dhabi for the first energy summit hosted by the UAE Energy Ministry, the state oil company Abu Dhabi National Oil Company and facilitated by US think tank The Atlantic Council.
The ministers from Kuwait and Iraq had dropped off the agenda but may also turn up.
Al Mazrouei said the ministers will not hold any formal talks but discussion of the current state of play in the oil markets is the agenda of the summit and they will gather informally.
There will also be top US officials from the foreign policy and energy establishment, including former ambassador Richard Morningstar, who was President Bill Clinton’s senior energy envoy.
Al Mazrouei said on Wednesday that the policy before November’s deal to let the market squeeze out expensive supply, particularly form the US shale producers, had worked. Letting oil prices drop sharply from 2014 had led to a decline in US production, from a peak in 2015 of 9.6mn bpd to about 8.4mn bpd by summer last year.
“I am pro shale but we need a pace of growth to be adequate with that expensive form of oil,” he said, noting that investment in the US shale sector had become overheated by 2014. “Reaching that level of investment, I think people will have learnt their lesson. They won’t get their fingers burnt so easily again.”
There was a different note from Amos Hochstein, the US state department’s special energy envoy, who also spoke at the Abu Dhabi forum on the same day. “With the increase in oil prices in last few months we’ve also seen a regrowth in US shale,” he said. “We now have 525 rigs producing around 8.7mn bpd. If you look back at 2014 we had 1,600 rigs producing about the same amount – just three years ago. That is a remarkable shift.”
Al Mazrouei echoed the sentiment, saying that it was foolish to try to control the market or target a price. Forcing oil prices up too far, too fast simply encourages higher-cost producers and leads to market share loss.
“You end up cutting, cutting, cutting and lose market share and that is not going to work,” he said.
“I will never quote the price. If we target price we are a cartel and we are not a cartel.” Rather, the aim of the deal is price stability, he said.
