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News Article

Oil Prices Rise as UAE Minister Talks of Normality

By Peter Appleby | Tue, 06/16/2020 - 17:33

After a week of doubt and worry, oil prices rode a poor start on Monday to finish the day’s trading with a 2 percent price increase, driven by OPEC+ countries complying with production cuts, Reuters reports.

Positive words from the UAE’s Minister of Energy Suhail Al Mazrouei about his country meeting production cut commitments it had previously agreed, pushed WTI to climb 2.37 percent, 86 cents to US$37.12 per barrel. Brent, meanwhile, closed up 99 cents, or 2.56 percent, to finish the day on US$39.72 per barrel, says Reuters. Meanwhile, the Mexican crude basket closed up 91 cents at US$32.33 per barrel, an increase of 2.90 percent against Friday’s price.

According to Bloomberg, the energy minister claimed prices will return to normal within 12 to 24 months, despite the outlook during the crisis having looked particularly grim. Speaking on an Atlantic Council webcast interview, Al Mazrouei said this recovery from negative pricing is due to the historic 9.7MMb/d production cut agreement made by OPEC+ countries, including Mexico.

Despite prices wobbling in past weeks, including a steeper drop last week as US storage levels reached a historic peak, the minister said that OPEC+’s cut was “adequate” to right prices. However, he noted that it was important that countries did not jump the gun on production. “We feel unless we have another wave of COVID-19, a second wave, I think we will see demand recovering at a pace that is adequate to the cut we have done as OPEC+, provided other producers do not rush quickly and overproduce,” the minister said.

The UAE is currently involved in a production capacity build-up project in which it hopes to have 5MMb/d by 2030 and reached 4.2MMb/d this April, reports WAM, the Emirates News Agency.

On prices, Al Mazrouei said that “we are confident that things will go normal and demand will be restored, but the question is when and how long it will take. Whether it is one or two years, we need to ask all producers, including US producers, to be patient in bringing supply back to keep the balance around the five years’ average.”

Accusations of “quota cheating” had upset prices two weeks ago prior to the OPEC+ agreement to extend the production cut by one month. Nigeria and Iraq made public statements saying they were working towards their share of the output reduction.

Peter Appleby Peter Appleby Journalist and Industry Analyst