OPEC’s third biggest producer, the United Arab Emirates (UAE), is entering the oil price war as the Abu Dhabi National Oil Company (ADNOC) said on Wednesday it was positioned to boost its supply to the market to over 4 million bpd in April, one million bpd higher than current production.
The UAE has been pumping around 3 million bpd, in line with its commitment to stick to and even overcomply with the OPEC+ production cut deal, which fell apart last Friday.
“In line with our production capacity growth strategy announced by the Supreme Petroleum Council, we are in a position to supply the market with over 4 MMBPD in April,” ADNOC Group chief executive, Dr. Sultan Ahmed Al Jaber, said in a statement.
ADNOC, which pumps nearly all the oil in the UAE, is also accelerating plans to increase its production capacity to 5 million bpd, Al Jaber said.
Commenting on the supply boost, Rystad Energy's Bjoernar Tonhaugen said: ''We expected similar announcements from other core-OPEC members, such as the UAE today, that crude production and capacity will be ramped-up following Saudi Arabia's announcement. We believe UAE can ramp up production to around 3.3-3.4 million bpd from their current output of ~3.0 million bpd in the short term, and will likely draw-down storage to supply clients additional barrels if there is enough demand for UAE barrels.'' Related: Big Oil Prepares To Suffer In 2020
The 1-million-bpd supply increase from the UAE in April adds to the 2.6 million bpd which Saudi Arabia promised to unleash on the oil market next month, resulting in a total increase of 3.6 million bpd in global oil supply from OPEC’s heavyweights at a time of depressed oil demand due to the coronavirus outbreak and at a time of crashing oil prices, following the abrupt end to the OPEC+ deal last week.
Saudi Arabia’s oil giant Aramco will also begin to work on increasing its maximum sustainable capacity from 12 million bpd to 13 million bpd, as per Energy Ministry orders, the company said in a stock exchange filing on Wednesday.
“The Company is exerting its maximum efforts to implement this directive as soon as possible,” Aramco’s president and CEO Amin Nasser said in a statement carried by the Saudi Press Agency.
The promises of OPEC’s heavyweights to flood the market with oil were met by a Russian response that Moscow can raise its oil production by 200,000 bpd to 300,000 bpd in the short term, with a potential for up to a total increase of 500,000 bpd, as Russia also digs in for an oil price/market share war. The escalation in the promises for higher oil supply weighed on oil prices again on Wednesday after a brief respite on Tuesday. Early on Wednesday before the EIA inventory report, Brent Crude was plunging 3.4 percent at $35.95 and WTI Crude was down 3.26 percent at $33.24.
By Tsvetana Paraskova for Oilprice.com
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If the objective is to enhance its market share, this will not work. If crude oil buyers are not buying crude from an already glutted market because of the coronavirus outbreak, how could flooding the global oil market and augmenting the glut further prompt them to buy.
If, however, the objective is to join hands with Saudi Arabia in a price war with Russia, this will not work either. Russia’s economy could live easily with an oil price ranging from $25-$30 for many years to come compared with a much higher price than $85 for Saudi Arabia, the UAE and the majority of OPEC members.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London
Department of economics
University of Manitoba
There will be a war soon if this continues on. Remember oil companies in US and Europe have a lot of pull with politicians.