Abu Dhabi summit: Oil production cuts may be necessary - EcoFinBiz Blog

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Abu Dhabi summit: Oil production cuts may be necessary

ABU DHABI, United Arab Emirates — OPEC and allied oil-producing countries will likely need to cut crude supplies to rebalance the market after proposed U.S. sanctions on Iran failed to cut Tehran’s output, the top Saudi and Emirati energy officials said Monday.

The comments from Saudi Energy Minister Khalid al-Falih and his counterpart from the United Arab Emirates, Suhail al-Mazrouei, currently the president of OPEC, show the balancing act the two U.S. allies face in dealing with President Donald Trump’s actions.

Trump in recent weeks demanded the oil cartel increase production to drive down U.S. gasoline prices. Meanwhile, Trump’s administration allowed some of its allies — Greece, India, Italy, Japan, South Korea, Taiwan and Turkey — as well as rival China to continue to purchase Iranian oil despite re-imposed sanctions on Tehran and as long as they work to reduce their imports to zero.

Al-Falih, who on Sunday said the kingdom would cut production by some 500,000 barrels per day in December, said Monday that Saudi Arabia had been giving customers “100 per cent of what they asked for.” That appeared to be a veiled reference to Trump, who has written tweets critical of Saudi King Salman over oil prices.

Before the United States re-imposed sanctions on Iran, “fear and anxiety gripped the market,” al-Falih said at the Abu Dhabi International Petroleum Exhibition & Conference. Now “we’re seeing the pendulum swing to the other side,” he added.

Al-Mazrouei similarly said “changes” would likely be necessary as OPEC meets in December in Vienna. However, he added: “We need not to overreact when these things happen.”

Al-Falih said OPEC officials have seen analysis papers suggesting a production cut of upward of 1 million barrels of crude a day may be necessary to rebalance the market. However, he stressed that more study needed to be done.

Crude oil dropped to a low of $30 a barrel in January 2016. That forced OPEC to partner with non-OPEC countries, including Russia, to cut production to help prices rebound.

Benchmark Brent crude, which had been trading above $80 a barrel recently, now hovers just over $70 after the U.S. sanction waivers on Iran.

Meanwhile, Sultan Ahmed al-Jaber, the head of the state-run Abu Dhabi National Oil Co., said the UAE planned to increase oil production to 4 million barrels of oil a day by 2020 and 5 million barrels a day by 2030. The UAE now produces some 3 million barrels of oil a day.

Al-Jaber also said the UAE would begin fracking — injecting high-pressure mixtures of water, sand or gravel and chemicals — to gain access to otherwise unreachable natural gas reserves.

“Make no mistake: Hydrocarbons will continue to play an absolutely essential part of a diversified energy mix,” al-Jaber said.

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Follow Jon Gambrell on Twitter at http://www.twitter.com/jongambrellap .

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