The UAE “unconditionally” supports OPEC+ supply increase, the minister said

Dubai, United Arab Emirates-The United Arab Emirates has fought back against OPEC+ leaders Saudi Arabia and Russia, claiming its “sovereign right” to negotiate fairer terms to increase oil production.

“For us, this is not a good deal,” UAE Energy and Infrastructure Minister Suhail Al Mazrouei told CNBC’s Hadley Gamble, referring to OPEC+ production cuts, which are based on “production levels dating back to 2018”.

“We know that in terms of our current capacity and production levels, the UAE’s position in the agreement is the worst,” he said on Sunday.

“But agreement is agreement.”

When asked if the UAE is willing to walk away, the minister said: “Under the same conditions, we cannot extend the agreement or reach a new agreement. We have the sovereign right to negotiate this.”

The comment was made after the United Arab Emirates blocked certain aspects of OPEC+’s proposal to increase production on Friday, seeking better conditions for itself.

“Let us increase production and discuss extensions and agreements and conditions related to them in future meetings,” he said, adding that the UAE unconditionally supports increased supply.

“We met on Monday and I think we all agreed on what we need to do to increase production,” Al Mazrouei said. He added: “The problem is to put conditions on this increase, which is to extend the agreement.”

This high-risk stalemate happened when oil prices soared above US$75 per barrel for the first time in two years. Failure to reach an agreement on Monday may lead to market recovery, and if the deadlock is not resolved, it may even destroy the fragile OPEC+ alliance.

He said: “We have enough time to meet and discuss the terms of the extension, and there are reasons for an independent agency to review it.” He added: “I still hope that by Monday we can separate the two decisions.”

The UAE threatened to withdraw from OPEC at the end of last year. The withdrawal will almost certainly trigger a repeat of the OPEC+ price war, which pushed oil prices to $-40 in April last year.

“Raising prices to levels that the world economy cannot afford is unwise for anyone, nor is it a goal,” he said. “We think we need to do this, we need to do it in August,” Al Mazrouei added.

The core of the current proposal is a plan to increase production by 2 million barrels per day (mb/d) at a rate of 400,000 barrels per day between August and December. OPEC+ also plans to extend its production reduction agreement from April 2022 to December 2022.

“Now we believe that it is unrealistic to link the extension of the agreement with the time period beginning in 2018 and 2022 because it is four years,” Al Mazrouei said.

“It’s totally unfair.”

The UAE has spent billions of dollars investing in its oil production capacity in an effort to increase production. As Iran will also return to the oil market in the next few months, the UAE believes that there is a lot of room to review these provisions.

“The UAE’s crude oil production in October 2018 was 3.160 mb/d. But it increased to 3.841 mb/d in April 2020. By changing the base, the UAE can immediately increase production substantially,” tweeted Anas Alhajji, Managing Partner of Energy Outlook Said consultant.

“They don’t want the OPEC+ agreement to limit their output and potential,” he added.

Saudi Arabia’s restrictions on travel to the UAE late on Friday citing the pandemic may be another sign of tension between the two countries.

When asked about the White House’s silence on the internal disputes of the production team, Mazrui replied “Happy July 4th.”