Abu Dhabi: The UAE’s Minister of Energy and Industry on Wednesday slammed legislation in the United States that would open up many oil-producing nations to lawsuits.
Suhail Al Mazroui said that the bill, which hasn’t yet been passed by American lawmakers, will even hurt US oil producers, adding that the Organisation of Petroleum Exporting Countries (Opec) has done a “great deal” of good to shale producers.
At the Bloomberg Invest conference in Abu Dhabi, the minister reiterated his warning of “chaos” in an oil market without Opec.
“I had several discussions with many of the major [oil] producers. Everyone is aligned that it’s [the bill] a bad idea. Everyone is aligned that it’s going to affect volumes from the US,” Al Mazroui said.
“It will destroy value and lose some of those volumes that [shale producers] have achieved, because it will mean that the market will assume that it’s open for all, and everyone is going to be dumping in the market.”
The piece of legislation, known as ‘Nopec’ has garnered support from some lawmakers both in the Democratic and Republican parties, and would allow nation members of Opec to be sued under US law for antitrust violations. The bill would essentially make it illegal for foreign nations to work together to control the supply of fossil fuel, CNBC reported.
Still, the chances of that bill passing are slim, reports suggest, but it has already stirred up conversations among oil producers. Mohammad Barkindo, secretary general of Opec, said last month that the proposed legislation “won’t serve the US interest.”
On Wednesday, the UAE’s Al Mazroui said that he believes the legislation will be pushed down by US producers as they have benefited from Opec’s presence.
He pointed to the oil market’s performance between 2014 and 2017 when Opec did not curb its output levels in response to high levels of supply. Oil prices plunged in that period from a high of over $110 (Dh403.9) a barrel to below $30, hurting both conventional and shale oil producers.
“That’s, I think, a real testimony of what could happen to US production if Opec just do nothing. Imagine, if instead of doing nothing, there’s no Opec. And if there’s no Opec, there’s no balance in the market… It’s going to be chaos,” he said.
In November 2018, Al Mazroui made similar comments in response to a study by a Saudi Arabian think tank that examined what would happen to oil markets in a world without Opec. The minister said at the time that it was “naïve to think that you can just get rid of Opec and things will be better.”
During a discussion at the conference, Al Mazroui also said that there is a “high probability” for balance in oil markets to be achieved by the end of this year — provided economic conditions are favourable.
He added that such balance would result in better economic growth, and expected to see higher compliance levels among Opec members with regards to cutting their production levels.