UAE Opposes OPEC+: "Welcomes Production Increase... Extension of Cuts to Be Decided Later"

Suhail Al Mazrouei, UAE Minister of Energy
[Photo by AP Yonhap News]

[Asia Economy Reporter Park Byung-hee] The Organization of the Petroleum Exporting Countries (OPEC) and the OPEC+ coalition, which includes major non-OPEC oil-producing countries such as Russia, unusually failed to reach an agreement on oil production levels, extending their regular meeting by two days. After consecutive failures to reach an agreement during the meetings on the 1st and 2nd, OPEC+ plans to hold another meeting on the 5th to attempt a consensus. The reason for the lack of conclusion over the two days is reported to be opposition from the United Arab Emirates (UAE).

UAE Energy Minister Suhail Al Mazrouei (pictured) stated in an interview with CNBC on the 4th (local time) that the UAE is currently in the most disadvantageous position among OPEC+ member countries. This is because the UAE has significantly expanded its production capacity through billions of dollars of investment.

The UAE's daily crude oil production was 3.16 million barrels in October 2018 but increased by 21.5% to 3.84 million barrels as of April last year. Having greatly expanded production capacity, the UAE suffered severe damage when the COVID-19 pandemic occurred.

Currently, OPEC+ plans to increase daily oil production by 400,000 barrels each month starting in August, aiming to raise total output by 2 million barrels by the end of the year. However, this increase is based on a prior production cut. In the April meeting last year, shortly after the COVID-19 pandemic began, OPEC+ decided to cut daily production by 5.8 million barrels from January 2021 to April 2022. In other words, even with a 2 million barrel increase in the second half of this year, the premise of a 5.8 million barrel cut remains, effectively resulting in a 3.8 million barrel cut.

Along with this, OPEC+ agreed to extend the deadline for the 5.8 million barrel production cut from April 2022 to December 2022, an extension of eight months. This means that while production will increase by 2 million barrels in the second half of this year to reduce the scale of cuts, the cut period will be extended to regulate supply. The effect of the 2 million barrel increase is thus offset accordingly.

The UAE, having significantly expanded its production capacity, opposes this agreement. Minister Mazrouei emphasized, "All OPEC+ member countries want to increase production," and stated that the UAE unconditionally supports production increases. However, he argued that the decision to increase production should be made first, and the extension of the 5.8 million barrel cut deadline can be discussed in subsequent meetings. He expressed hope that the increase and the extension of cuts would be decided separately at the meeting on the 5th.

Minister Mazrouei also pointed out that the 5.8 million barrel cut condition is based on 2018 production levels, which is problematic. Since the increased production capacity after 2018 is not reflected, the UAE is effectively required to produce much less than its actual production capacity.

This content was produced with the assistance of AI translation services.