The high crude oil prices being enjoyed by members of the Organisation of Petroleum Exporting Countries (OPEC) and other producers may suffer a setback next year as the United Arab Emirates (UAE), says it is backing out of oil cuts.
The UAE said it will raise its oil output next year as it has won a higher quota under the OPEC+ agreement.
The implication is that crude oil supply at the international market may outstrip demand, thus forcing the price to fall.
The country said in the summer that it would not join the Saudis in making voluntary production cuts.
The UAE has argued for years that it should be allowed to pump more than its current OPEC+ quota as it is raising its production capacity.
At the June meeting, the UAE got a huge concession from OPEC+ in the form of an upward revision of its quota that will take its production up by 200,000 barrels per day (bpd) to 3.219 million bpd for 2024.
A rise in the UAE’s oil production next year doesn’t necessarily mean that the OPEC+ group would be pumping more; some members such as Angola are underperforming compared to their already lowered quotas.
While the UAE is set to boost its oil production in 2024, market speculation is growing that OPEC’s top producer, Saudi Arabia, will extend its voluntary cut into 2024, considering the latest slide in oil prices to $80 and the typically weak period for oil demand in the first quarter of every year. Market talk is also intensifying that OPEC+ could announce a deeper cut at the group’s meeting on the weekend November 25-26.
The recent weakness in oil prices “has increased noise over what OPEC+ will decide to do at its meeting on 26 November. We continue to expect that Saudi Arabia and Russia will roll over their additional voluntary cuts into early 2024,” ING strategists Warren Patterson and Ewa Manthey wrote on Monday.
“However, what is less clear is whether the broader OPEC+ group will make further cuts,” they added.
A deeper group cut combined with the Saudis and Russians rolling over their voluntary reduction would wipe out the currently expected market surplus in the first quarter of 2024, the strategists noted.