Desk Report
Publish: 10 Mar 2022, 04:10 pm
Representational Image || Photo: Collected
The United Arab Emirates will
encourage fellow Opec members to increase oil production as Russia’s invasion
of Ukraine has driven crude prices to their highest levels in more than a decade,
a senior official said.
The UAE is the first Opec member
to call on the alliance to boost its production since Vladimir Putin, president
of Russia, triggered a global crisis by ordering his troops into Ukraine two
weeks ago.
Yousef al-Otaiba, the UAE’s
ambassador to Washington, said in a statement to the Financial Times: “We
favour production increases and will be encouraging Opec to consider higher
production levels.”
“The UAE has been a reliable and
responsible supplier of energy to global markets for more than 50 years and
believes that stability in energy markets is critical to the global economy,”
he added.
The Emirati ambassador’s
statement came a day after US President Joe Biden imposed an immediate ban on
imports of Russian crude, sparking fears that other countries would follow in
blocking Russian energy flows.
The Biden administration has for
weeks been pressing oil producers to increase their output to help reduce
prices. But the Opec+ alliance, which includes Russia, has declined to go
beyond a plan agreed last year to increase production each month by 400,000
barrels a day.
Brent crude, the international
benchmark, traded as high as $131.64 a barrel on Wednesday, but pulled back
sharply to about $111 following the comments from the UAE. Iraq also indicated
on Wednesday that it was prepared to increase output if required.
Later on Wednesday, Suhail Al
Mazrouei, the UAE’s energy minister, tweeted that the country remained
“committed to the Opec+ agreement and its existing monthly production
adjustment mechanism”.
The UAE is a close ally of Saudi
Arabia, the de facto leader of Opec, which has resisted US calls to raise
production. However, last year Abu Dhabi became embroiled in a dispute with
Riyadh over output quotas.
It was not immediately clear if
the UAE had co-ordinated with Saudi Arabia on its plans to encourage Opec to
increase production.
But Abu Dhabi’s position will be
welcomed by the Biden administration, which is concerned about rising prices at
American petrol pumps and the impact of soaring energy costs on the global
economy.
Analysts caution that there is
little spare production capacity globally, with only Saudi Arabia able to
significantly raise output, and the UAE to a lesser degree. They add that even
a co-ordinated move might have limited impact.
“They know there is not enough
spare capacity to fill a Russia-sized hole,” said Amrita Sen, at Energy
Aspects. She added it was not surprising that the UAE was the first Opec member
to voice support for increasing production, as it had previously indicated it would
like to raise its exports.
Some Opec members, including
Nigeria, Angola and Malaysia, have consistently failed to meet their production
quotas since the most recent Opec+ agreement was reached last year.
Otaiba, who is one of the most
influential Emirati officials, said last week that the UAE and the US were
“going through a stress test but I’m confident that we will get out of it and
get to a better place”.
Helima Croft, a managing director
at RBC Capital Markets and a former CIA analyst, said the US still needed to
offer something to Saudi Arabia if it wanted to secure the world’s top oil
exporter’s help in driving down oil prices.
“What is in the US offer letter
to Saudi Arabia to get them to essentially walk away from the Opec+
arrangement?” Relations between Riyadh and Washington have been strained since
Biden took office. The president has criticised the kingdom over human rights
abuses, including the 2018 murder of Jamal Khashoggi by Saudi agents, and
promised to reassess relations with Saudi Arabia, and to not engage with Crown
Prince Mohammed bin Salman, the day-to-day ruler.
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