UAE energy minister Suhail Al Mazroui Image Credit: AP

Abu Dhabi: UAE energy minister Suhail Al Mazroui quashed pessimistic views on market balance and said it would be achieved in the first quarter of 2019 due to a production cut agreement between Opec and non-Opec members that came into effect on Tuesday.

“As we start a new year, I remain optimistic toward achieving the market balance during the 1st quarter after Opec and non-Opec production cut. At this time last year, we remember the same pessimistic views which we disagreed with and as we expected 2018 was a good year,” he tweeted on Tuesday.

The comments come as oil prices slide due to over-production and weak demand. From more than $85 (Dh312) per barrel in early October, global benchmark Brent slid to $50 per barrel last week, and was currently trading at about $54 per barrel, up by 1.11 per cent.

US crude West Texas Intermediate was up by 0.18 per cent at $45.41 per barrel. Iran sanction waivers granted to eight countries also contributed towards oversupply in the market leading to drop in oil prices.

All Mazroui previously said Opec and its allies will consider deeper cuts if a 1.2 million barrels per day reduction isn’t enough to balance the market.

He also said extending the agreement signed in early December will not be a problem and the group will even consider holding an extraordinary meeting to take stock of the situation and find solutions.

What is the output cut deal?

Opec (Organisation of the Petroleum Exporting Countries) and non-Opec members led by Russia are cutting production by 1.2 million barrels per day to rebalance oil markets and prop up oil prices. The agreement was reached in Vienna on December 7 and came into effect from January 1 and will continue for six months.

As part of the deal, Opec would be reducing output by 800,000 barrels per day and non-Opec members by 400,000 barrels per day. The deal will be reviewed in April for further action to rebalance oil markets.

Oil producing countries implemented a similar agreement in January 2017 and brought in changes during an Opec meeting in June this year where they decided to increase output by 1 million barrels per day as rising oil prices were dampening demand and creating problems for high oil consuming countries like India and China.

US President Donald Trump also put pressure on Opec countries to increase production to bring down oil prices. Subsequently, he granted waivers to eight countries from Iran sanctions and allowed them to continue importing oil from Iran.

The move from the US president contributed to a glut in the market as a number of countries including Saudi Arabia and Russia increased production anticipating shortages in the market due to Iran sanctions and restrictions on the export of oil from the Islamic Republic.