UAE oil output rises as Opec holds the line

Jan 15, 2015 12:00 AM

The UAE increased oil production substantially last month as Opec maintained output levels amid a worldwide oil glut, according to the body’s latest monthly report on the market.

Among individual Opec member countries, the UAE officially reported to the Opec secretariat in Vienna that it pumped an average of just more than 2.9 million barrels per day in December, an increase of about 153,000 bpd from the previous month.

The UAE Energy Ministry was unavailable to comment on the source of the extra barrels, and the secretariat research department said it received no explanation about the increase.

“We had never received any reason for the production revision” from the UAE, said Mohammad Ali Danesh, the oil supply analyst at Opec.

The report by the Opec secretariat is not as widely watched as that due out today from the International Energy Agency, the Paris-based consumer countries’ think tank.

However, it is a chance to see what Opec members are officially reporting as their output levels and how those differ from the estimates of secondary sources, which are comprised of surveys by specialist news agencies.

Opec member countries as a whole produced almost 30.6 million bpd last month, according to their officially reported volumes. Venezuela has not sent in its output numbers for several months, so that overall figure includes the secondary source number for that country of just over 2.3 million bpd.

Opec’s own output level was even higher than the 30.2 million bpd expected by secondary sources and way ahead of the 28.8 million bpd that Opec believes will be needed this year after it revised down its forecast by 100,000 bpd.

Oil statistics from most of the widely watched sources – including Opec, the IEA, monthly industry surveys and the US Energy Information Agency – are often erratic and subject to large revisions.

“We track all of these numbers – Opec, Reuters, Bloomberg, MEES, the IEA – and it’s amazing they come out with these estimates to two decimal places when they can get revised subsequently by 500,000 barrels per day or more,” said Amrita Sen, the chief analyst at Energy Aspects in London.

But the figures remain influential in the oil futures market.

While the crash of nearly 60 per cent in oil prices since June may be seen by some as an overreaction, Ms Sen said that “once Opec decided to do nothing in the face of oversupply this was the natural reaction”.

Opec’s most influential member, Saudi Arabia, reported that it produced just more than 9.6 million bpd last month, which was close to the estimates of secondary sources.

Saudi Arabia’s oil minister, Ali Al Naimi, has said repeatedly that it is up to the market to decide where prices should be.

The UAE Energy Minister Suhail Al Mazrouei has backed this stance and said lower oil prices will discourage production in North America, where most of the extra production last year came from – thus rebalancing oil markets.

Another notable number in Opec’s latest report was a large increase by Iraq – up 347,000 bpd at more than 3.3 million bpd in December, according to its official number. The secondary source number was even higher, at 3.6 million bpd, but that seems to be because those sources were double-counting supply from the Kurdish region, which had been marketing its own crude outside the ministry’s control until a recent deal was struck with the central government.

The higher UAE output in December could be partly explained by the addition of production from the offshore Umm Lulu field, which began pumping in October and is expected to add more than 100,000 bpd.

The UAE has a number of upgrade projects at various stages as part of a plan to increase oil production capacity to 3.5 million bpd by 2018.

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