The Abu Dhabi National Oil Company (ADNOC) can raise its oil production by “several hundred thousand” barrels per day (bpd), the state-run oil firm of the United Arab Emirates (UAE) said on Tuesday.
ADNOC confirmed that its current crude oil production capacity stands at 3.3 million bpd and stays on track to boost its production capacity to 3.5 million bpd by the end of this year if the market requires it.
Will the market require it?
“ADNOC can increase oil production by several hundred thousand barrels of oil per day, should this be required to help alleviate any potential supply shortage in the market,” the company said in a statement, as carried by Emirates news agency WAM.
“ADNOC is working in close cooperation with the UAE’s Ministry of Energy and Industry,” the state-run oil company said.
Abu Dhabi holds most of the oil resources of the UAE, whose crude oil production was 2.9 million bpd in May, according to OPEC’s secondary sources.
According to industry sources who spoke to Reuters, the UAE’s oil production was 2.9 million bpd in June, flat compared to May and just in line with its production quota of 2.9 million bpd under the original OPEC deal.
Compared to the production capacity that ADNOC says it has — 3.3 million bpd — the UAE may have the ability to raise its oil production.
More than just preparations?
However, Saudi Arabia said on Tuesday that they are prepared to increase crude output to address global oil market imbalances if necessary, as OPEC and its allies look at ways to boost supply after 18 months of production cuts.
Saudi Arabia, the world’s top oil exporter, could use its spare production capacity, which analysts place at 2 million barrels, to help balance the markets “when needed to deal with any future changes in oil supply and demand rates in coordination with other producing countries,” the kingdom’s cabinet said in a statement carried by the Saudi Press Agency.
Saudi Arabia has the most massive spare capacity within OPEC, and the cabinet’s confirmation followed an earlier phone call between the US President Donald Trump and Saudi monarch King Salman.
Trump tweets – the world cheers
The US President on Saturday tweeted that he had spoken with the Saudi monarch to bring about 2 million bpd of supply back on to the market to help lower prices, although the White House later backtracked on this claim.
The announcement, which was anticipated by the oil markets pushed the West Texas Intermediate benchmark to $75.13 per barrel for the first time in three years.
Brent, the benchmark for light, sweet crude traded at $78.3 at 5.20pm UAE time. The Saudi promise followed a joint statement with Russia reaffirming their earlier pledge in Vienna last month to bring a million bpd to the markets.
The UAE Energy Ministry and Abu Dhabi National Oil Company Company also released statements saying they would increase production capacity to plug shortfalls in the markets if needed.
The UAE and Saudi Arabia account for 4.5% and 13% of the global oil output, respectively.
The Kingdom and its allies, which includes Russia, agreed to bring 1m bpd back on to the markets on July 1.
OPEC+, as the group is known, did not reveal by how much each country would raise its production, although, Saudi Arabia and Russia are widely expected to shoulder much of the increase.
Despite Saudi Arabia’s potential 2 million bpd spare capacity, the country was unlikely to put all of it on the line, said Giovanni Staunovo, commodity analyst at UBS Wealth Management. “ Khaled Al Falih mentioned at the press conference in Vienna that they would not allow the glut to develop again. They will not pump as much as they can and completely remove their spare capacity from the market to flood the market,” he said.
The bigger question remains whether Saudi Arabia would find takers for the 2 million bpd that it could potentially bring to the market, rather than its ability to do so, noted Dallas-based independent energy expert Anas Al-Hajji.
“We have seen it in 2007 and 2008, Saudi Arabia offered extra oil to the market, but no buyers,” he said.
UAE Energy Minister Suhail Al Mazrouei said on Tuesday the group would seek to maintain “overall conformity levels” for the remainder of the year.
“OPEC from July 1 will strive to adhere to the overall conformity levels for the remaining duration of the Declaration of Co-operation,” he said, referring to the agreement endorsed by OPEC+ to restrict production towards the end of 2016. “OPEC and non-OPEC countries participating in the Declaration of Cooperation remain unwavering in their commitment to contribute to market stability, in the interests of producers, consumers and the global economy,” Mr. Al Mazrouei added.
Russia, which is the most prominent sovereign producer of crude outside of OPEC will look to cement their market-balancing deal into a stronger “super club” by the end of the year, The National reported.
The statements by ADNOC and Mr. Al Mazrouei come as OPEC is under pressure from President Trump to bring oil prices down, which rose to three-year highs earlier this year.
A low oil price environment would suit US domestic politics, as the country prepares to vote on midterm elections in November.
Oil prices rose to nearly $80 per barrel last month, sustained by previous OPEC curbs, as well as declines in output from Venezuela and Libya, and prospects of Iranian barrels slipping from the market in the aftermath of US sanctions against the country.