UAE says oil cuts should remain

Tamsin Carlisle

• Last Updated: November 07. 2009 10:15PM UAE / November 7. 2009 6:15PM GMT

DUBAI // The UAE has joined a growing OPEC contingent that has been calling for the group to stay the course on production cuts when it meets on December 22.

Raising output to put the brakes on rising crude prices “is not on the agenda”, said Mohammed al Hamli, the Minister of Energy.

Internationally, the oil market remained “a little bit oversupplied” due to stubbornly high global inventories of crude and refined oil products, he said.

“There are certainly signs of (economic) recovery that have supported prices, but we are not out of the woods yet,” Mr al Hamli warned.

Last month, Abdalla el Badri, the secretary general of OPEC, said the group might raise its output target if oil stocks returned to “normal” levels, which he defined as their five-year average, and if there were “real economic growth”.

There are signs that the first of those conditions could soon be met.

Last Wednesday, the US government said crude stockpiles in the world’s biggest economy fell by 4 million barrels in the week ended October 30 to 335.9 million barrels. “Crude oil stockpiles are near the upper limit of the average range for this time of year,” the US energy department noted in a weekly report.

But the release on Friday of unexpectedly grim US unemployment figures raised fresh doubts about economic recovery, sending crude tumbling 3 per cent to US$75.87 per barrel, its lowest level in nearly a month.

Government data showed the US unemployment rate reaching a new 26-year high of 10.2 per cent last month as 190,000 jobs were shed.

“Naturally, this data will not provide much intellectual substance to an argument that concludes the economy is recovering; nor for that matter, for energy demand growth,” Mike Fitzpatrick, an analyst with MF Global, told Bloomberg.

But crude prices recently have been mainly influenced by factors unrelated to supply and demand, especially the weakness of the US dollar against other major currencies, which has led investors to move capital into US dollar-denominated commodities. Gold hit a record $1,100 per ounce on Friday, while crude touched a one-year high of $82 late last month.

The problem facing OPEC ministers due to meet next month in the Angolan capital of Luanda is that any further increase in crude prices could threaten global economic recovery, causing oil demand to fall back.

Iranian and Venezuelan OPEC officials have said they oppose raising production quotas.

“We do not share the position of increasing output. We still notice a lot of instability in the oil market. There are many speculative factors. There are many factors linked to the devaluation of the dollar. There are many perception factors that markets have about the real recovery of the economy, especially in the United States,” Rafael Ramirez, the Venezuelan oil minister, said last week.

OPEC’s output edged up last month to 28.8 million barrels per day (bpd) from 28.7 million bpd in September, according to the Middle East Economic Survey. But the 11 members bound by production quotas still pumped 1.4 million bpd less crude than last December, when prices averaged $38.60 per barrel.

The group slashed its output target by a record 4.2 million bpd in a series of cuts announced late last year after crude slid from a record $147 in July.

Mr al Hamli said the UAE was in full compliance with its reduced OPEC quota. He said he was satisfied with the group’s overall compliance level.



tcarlisle@thenational.ae