OPEC and its allies in the production cut deal are committed to rebalancing the market and will not repeat last year’s preemptive production increase to offset expectations of oil supply losses, Suhail Al Mazrouei, the energy minister of the United Arab Emirates (UAE), said on Wednesday.
“I think we have learned the lesson. We will do what is required to balance the market. We are not going to jump the gun, pre-produce the volumes that are not required yet,” the UAE’s The National quoted Al Mazrouei as saying at the Bloomberg Invest Abu Dhabi conference today.
Al Mazrouei was obviously hinting at the decision by OPEC and Russia to reverse the production cuts in the summer of 2018, in order to ensure a well-supplied market amid expectations that the U.S. would drive Iranian oil exports to zero.
For months, the United States had said that it was aiming to cut off Iran’s oil exports, and the oil market started to fear in the summer of 2018 that a steep decline in Iranian oil barrels would tighten the global market too much. OPEC and Russia moved in to compensate for what was expected to be a significant loss of Iranian oil supply.
But then the U.S. granted waivers to Iran’s biggest oil customers, including China and India, and OPEC and its Russia-led allies forged in December a new production cut deal aimed at reversing the new glut that had started to build in Q4 2018 after OPEC anticipated incorrectly.
“I think we got a bit carried away with the fact that we took it for granted that those volumes were required by November,” Al Mazrouei said, suggesting that this time around, the OPEC-Russia alliance won’t be fooled into pre-producing more oil when it’s not immediately required by the market.
Last month, the OPEC+ allies canceled a scheduled extraordinary meeting in mid-April, leaving the decision for the cuts extension for a meeting at the end of June instead. Earlier this year, OPEC officials started to signal that mid-April would have been too early to assess the actual impact of the sanctions on Venezuela and the U.S. policy on the waivers for Iranian oil customers, after the current waivers expire in early May.
At the June meeting, OPEC and partners will have a clearer picture of where supply might be going, because the U.S. will have already decided whether to extend and to whom to extend waivers for Iranian oil purchases.