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The United Arab Emirates (UAE), currently OPEC’s third-largest producer, is estimated to have exported a lot more crude oil in August as it produced more than its quota under the OPEC+ deal, undermining the oil market’s faith in the group’s unity in the cuts.
According to tanker tracking data Bloomberg has compiled from several oil flow tracking firms, the UAE shipped more oil in August than it produced, and its production itself breached the limit set in the OPEC+ deal.
The UAE, which has so far followed Saudi Arabia’s lead to ‘lead by example’ and stick to the cuts, increased its oil production in August to above its quota as per the OPEC+ deal.
Crude oil production in the UAE averaged 2.693 million barrels per day (bpd) in August. This is some 100,000 bpd above the country’s production ceiling under the OPEC+ pact—2.59 million bpd. The key reason for the increased production in the UAE in August was said to be the high electricity demand in the hottest months in the Middle East, which this year was further boosted by more people staying and vacationing at home because of COVID-19-related travel restrictions.
Unlike in previous OPEC+ pacts, non-compliance with the quotas this time requires the culprits to compensate for any above-quota production with more reductions in the following months.
The UAE’s Energy Minister Suhail Al Mazrouei himself admitted that the UAE’s production increased to 2.693 million bpd in August, but that “measures have been taken to compensate for this temporary increase due to peak summer electricity demand in the UAE, which required an increase in oil production and associated gas.”
Al Mazrouei also said that Abu Dhabi National Oil Company (ADNOC) had notified its term customers that a 30-percent nomination cut would be applied to all grades in October.
Yet, tanker data compiled by Bloomberg showed that the UAE shipped about 2.9 million bpd in August. Even if shipping data is not an exact science because of tanker capacity fill, the fact that a loyal OPEC+ pact participant is breaching its quota has unnerved traders who told Bloomberg that this has weighed on prices and that OPEC+ should show unity if it wants its market-balancing efforts to succeed.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.