Al Mazrouei: Oil supply glut almost gone

Abu Dhabi: Oil prices are at the bottom of the price cycle and the supply glut in the market is almost gone, says Suhail Al Mazroui, UAE’s energy minister.

Speaking on Monday at the Abu Dhabi International Petroleum Exhibition and Conference (Adipec), the minister said, “We cannot afford to see a [price] hike that stays for long, and we realise that as a producer. We are not greedy to just see a hike that stays for four years, and then we see a [drop]. I think we need some sort of stabilisation in the price level and that cannot be done without significant investments.”

Al Mazroui also described global demand levels as healthy. He said he was optimistic about the outlook for oil prices, and said that the drop in prices over the past two years has forced the industry to raise efficiency, cut costs, and find new ways of optimisation.

“We have seen since the middle of 2014 till today a significant reduction in the number of projects that were supposed to come on stream. I think it adds up to no less than four to five million barrels [of oil], which were supposed to come this year in stream had all these investments been made.

“We have seen during these two years retraction… Any production that you see today was made two years ago… If the glut is gone and we don’t have major [new] supply, why shouldn’t we be optimistic?” Al Mazroui said.

Oil prices have more than halved since summer 2014 when they fell from their $115 (Dh422) highs to around $46 a barrel where they stand now. The decline has led to a plunge in revenues of governments in GCC that rely on oil income, resulting in budget deficits across the region’s governments.

Also speaking at the event was Mohammad Barkindo, secretary general of the Organisation of Petroleum Exporting Countries (Opec) who said Opec will continue to hold meetings in the coming days and weeks between its member countries and other non-Opec oil producers.

Barkindo said it was “vital” that Opec and non-Opec members cooperate and consult in order to rebalance the oil market.

His statement comes after Opec committed at a meeting in Algiers in late September to cut oil production to around 32.5 million to 33 million barrels per day. The meeting, however, did not lay out a plan on how the cuts will be implemented or which countries are going to cut their production levels.

In his speech, Barkindo highlighted challenges in the energy industry over 2015 and 2016, saying that investments in energy have been on the decline. He said investment values dropped by 25 per cent in 2015 and by 22 per cent in 2016.

The combined drop in both years is valued at well over $300 billion. Barkindo pointed that there has never been a three-year consecutive decline in history, and this led Opec to what he called a “landmark agreement” in Algiers in September.