UAE Cuts More In March/April, Questions OPEC Secondary Sources

The United Arab Emirates – which has, so far, failed to bring its production below the level required in OPEC’s production cut deal - is committed to the agreement and will be cutting this month and next more than the 139,000 bpd it had pledged, UAE’s Energy Minister Suhail al-Mazrouei has said.

Under OPEC’s production cut deal, UAE agreed to cut 139,000 bpd from the October 2016 reference production level of 3.013 million bpd, and to keep output capped at 2.874 million bpd between January and June.

According to OPEC’s secondary sources, UAE’s production in January was 2.931 million bpd, while the country self-reported production of 3.060 million bpd.

According to an S&P Global Platts OPEC survey, UAE’s oil production in February stood at 2.90 million bpd, and the January and February average of 2.916 million bpd was 42,000 bpd above its quota of 2.874 million bpd.

Its energy minister al-Mazrouei said in a series of tweets yesterday that UAE is committed to its share of the production cut and the compliance to cut 139,000 bopd for the first six months is happening. He further specified that UAE “production cut for March and April will be more than 139,000 bopd due to the maintenance activities which means more than 100% compliance.”

Further confounding industry analysts, Al-Mazrouei also tweeted “We are at a continuous discussion with some Secondary Sources to demonstrate/correct the compliance reporting on UAE required cut by OPEC”.

Related: OPEC Offers Olive Branch To U.S. Shale

So far, surveys and figures suggest that UAE has not been fully complying with the cuts in the first two months of the year. The minister’s tweets may suggest that it’s also possible that UAE views ‘100% compliance’ as cutting those 139,000 bpd (or more) -- regardless of baseline levels and the production cap as per OPEC’s deal.

Some analysts have been really surprised that the country has not followed close Gulf Arab allies Saudi Arabia in cutting deeper and leading by example.

“The UAE's output stands out,” a Paris-based commodities analyst told Platts. “Before the deal began, I would have bet my house on full compliance with the output cuts from Abu Dhabi.”

By Tsvetana Paraskova for Oilprice.com

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