An oil price correction is expected by the end of this year as the weak market forces producers to freeze production, the Energy Minister said on Monday.
Russia, Saudi Arabia, Qatar and Venezuela agreed last month to cap output at January levels if other producers join the pack, the first deal between Opec and non-Opec producers in 15 years.
But Iran wants to boost production after the easing of sanctions in January and Saudi Arabia and Russia, the world’s two largest oil exporters, are producing near record levels.
“I’m still optimistic that before the end of the year we will see some correction [in the oil price],” said Suhail Al Mazrouei. “I believe that the current prices are forcing everyone to freeze. It is happening as we speak. It does not make any sense for anyone to increase the production at the current prices.”
International crude benchmark Brent is down about 66 per cent from mid-2014 because of an oil glut, weak demand in Asia, particularly China, and a strong dollar. Brent was trading up 1.27 per cent to US$39.2 per barrel in noon trading in London.
“The majority of the world, 99.8 per cent or 99 per cent, are not incentivised to increase production. To the contrary the producing assets are currently losing now at the current prices, and I think those are all non-Opec,” said Mr Mazrouei.
“I think we will see a reduction in these fields, which will require higher prices than the prices that are today.”
The Energy Minister said the UAE had not received an invitation to a meeting between Opec and non-Opec members, but affirmed that the UAE is committed to cooperating.
“The UAE is always cooperating with Opec and if there’s a unanimous decision to meet within the majority members in Opec we will meet with non-Opec members,” Mr Al Mazrouei said.
Opec ditched its policy of propping up prices in 2014 in favour of protecting its market share, a move that pushed prices to a 2003 low.
Members of the oil-producing trade bloc failed to agree at their last meeting in December on an output ceiling, allowing member states to pump at will. Opec meets next in June to decide on policy.
Saudi Arabia produced 10.2 million barrels per day in January, according to Opec, which pumps a third of the world's output. Russia produces 10.9 million bpd, Venezuela 2.5 million bpd and Qatar 637,000 bpd, according to official data and Opec figures.
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