The United Arab Emirates (UAE) is now OPEC’s third-biggest producer, having surpassed Iran whose output has plunged below 3 million bpd with the U.S. sanctions on Iranian oil.
The UAE, an ally of the cartel’s largest producer Saudi Arabia in the Persian Gulf and within OPEC, is vying for playing a more prominent role as a ‘swing producer’ on the oil market and is boosting its oil production capacity for the longer term, despite the most recent output cuts to which it says it will be strictly adhering.
“We need that swing to allow us to contribute to production as needed,” the UAE’s Energy Minister Suhail al-Mazrouei told S&P Global Platts in an interview after OPEC and its non-OPEC partners agreed last week to curtail 2.5 percent of their combined October oil production levels between January and June next year, to rebalance the market spooked by a looming oversupply.
OPEC and its Russia-led non-OPEC partners agreed last week to cut a combined 1.2 million bpd for six months, with OPEC reducing output by 800,000 bpd and non-OPEC cutting 400,000 bpd. Iran, Venezuela, and Libya were given an exemption from the cuts in view of their ‘special circumstances.’
The Abu Dhabi National Oil Company (ADNOC), the producer of nearly all of the oil in the UAE, has already notified its customers that it will reduce the January 2019 crude oil allocations. “The UAE is committed to the voluntary production adjustments agreed with its OPEC and non-OPEC partners under the ‘Declaration of Cooperation’,” a statement said.
The UAE pumped 3.175 million bpd in October and boosted further its output in November by 71,000 bpd to 3.246 million bpd, according to OPEC’s secondary sources. With Iran’s production plunging by 380,000 bpd to 2.954 million bpd in November due to the U.S. sanctions on its oil, the UAE is now OPEC’s third-biggest single oil producer behind Saudi Arabia and Iraq.
Despite the cuts as part of OPEC’s policy to prevent another glut, the UAE is looking beyond the short-term strategies and to its oil production capabilities a decade from now, when U.S. production growth is expected to slow down while oil demand is forecast to continue to grow.