Oversupply in crude markets could take months or even years to fix depending on when producers outside OPEC cut their output, Abu Dhabi-based The National reported, citing comments by U.A.E. Energy Minister Suhail Al Mazrouei.
“We are experiencing an obvious oversupply in the market that needs time to be absorbed,” the newspaper reported Mazrouei as saying in e-mailed comments. The United Arab Emirates supported the November decision by the Organization of Petroleum Exporting Countries to maintain production, The National reported Mazrouei as saying.
Brent crude, a pricing benchmark for more than half of the world’s oil, tumbled 48 percent last year, the most since 2008. OPEC decided Nov. 27 to maintain production instead of cutting output to eliminate a surplus left by increased supplies from the U.S. to Russia.
“Depending on the actual production growth from non-OPEC countries, this problem could take months or even years,” the U.A.E.’s Mazrouei was quoted as saying in The National, referring to oversupply. “If they act rationally, we can see positive corrections during 2015.”
Saudi Arabia won’t cut its output, though producers outside the group are welcome to do so, Ali Al-Naimi, that country’s oil minister, said at a conference in Abu Dhabi Dec. 21. OPEC would find it “difficult, if not impossible” to give up part of its share in global oil markets by cutting output, he said Dec. 19.
Mazrouei said OPEC didn’t contribute to putting too much crude up for sale “and shall not be blamed if other non-OPEC countries oversupply the market,” according to The National.
U.A.E. oil output averaged 2.77 million barrels a day last year, down from 2.92 million barrels daily in August 2013, according to data compiled by Bloomberg. Saudi oil production at 9.5 million barrels a day is near a three-decade high of 10 million barrels daily reached in September. OPEC production at 30.2 million barrels a day in December exceeded the group’s own 30 million barrel a day target for a seventh consecutive month, according to the data compiled by Bloomberg.
Saudi Arabia and the U.A.E. have boosted output this decade to compensate for losses in OPEC production from countries such as Libya and Iran. The higher output from those countries and in North America combined with slowing demand growth in Asia to drive prices lower, OPEC’s Secretary General Abdalla El-Badri said last month in Abu Dhabi.
The low oil prices could encourage economic growth and, in turn, boost demand for crude, Mazrouei said, according to The National.
The U.A.E. plans to boost oil production capacity to 3.5 million barrels a day in 2017 and won’t change its development plans due to crude price fluctuations, The National reported Mazrouei as saying. The country can currently pump about 3 million barrels a day, according to data compiled by Bloomberg.
“Most of the projects are committed and under construction and we don’t foresee any delays on the capacity expansion,” he said. “But building the capacity is something and using it is something else. We will always be wise and considerate of the world supply and demand.”