UAE to Cut Production | Russell T. Rudy Energy LLC
Last week the United Arab Emirates announced they would cut production by more than 139,000 barrels of oil per day (bopd). The reduction in output is part of an effort to comply with an agreement to cut production to an average of 2.874 million bopd from the current level of about 3 million. It should be noted that production was already scheduled to be reduced by about 139,000 bopd due to planned oilfield maintenance in March and May.
Nevertheless, the UAE has always been a “good citizen” of OPEC and complied with production quotas in the past. Also, the announced reduction in output will bring the Emirates into full compliance with its OPEC limit. The UAE had focused its effort over the last few years on increasing production, but apparently is willing to make cuts to support the cartel in its efforts to reduce total output by 1.2 million bopd.
Previous OPEC production cutbacks have been plagued by poor compliance by member countries. However, this time around, most have been uncharacteristically conscientious in adhering to their quotas. In fact, about 90% of output reductions were realized in January alone.
Assuming flat to moderate growth in global demand for crude oil, supply becomes the primary price determinant. The two major sources of supply are OPEC and its allies who have agreed to cut production, and the other nations who are not parties to the accord. Chief among the latter group is the U. S. So far supply reductions by OPEC have been largely offset by increases in domestic production. Consequently, prices have not increased as much as intended, but have stabilized at current levels.
To read the article in its entirety, please go to http://www.rigzone.com/news/oil_gas/a/148796/UAE .
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