The Global News Source for the World of Science
16 January 2019Lab Chat
The Emirati oil industry enjoyed 12 months of growth and consolidation after several years of austerity in 2018, as the UAE’s oil output reached its highest ever summit in October. From its low of just 2.8 million barrels per day at the beginning of the year, the UAE finished strongly with its record output of 3.3 million barrels per day in October.
Although yet to be verified, the country’s Energy Minister Suhail al Mazroui said at the time that production capacity would reach 3.5 million barrels per day by the end of the year. However, he conceded that actual output figures would be subject to demand and the subsequent decision by the Organisation of Petroleum Exporting Countries (OPEC) to cut production in 2019 means that output is likely to slump, at least in the short term.
The production cuts imposed by OPEC in late 2016 were an attempt to drain barrels from global supply and balance rapidly falling barrel prices, which slumped to a ten-year low of just $40.68 per barrel that same year. The 14 countries of OPEC were joined by 10 others in voluntarily cutting production, which contributed to the remarkable removal of almost 180 million barrels of crude oil from storage in less than 12 months.
The cuts continued into mid-2018, at which points prices were pushed up to over $70 per barrel and experts were in widespread agreement that OPEC had succeeded in its mission of stabilising the market.
In response, OPEC countries (including the UAE) resumed business as usual and Emirati output jumped up from 2.9 million barrels in the summer to the record high of 3.3 million barrels just a few months later. After a successful year in which GDP was projected to increase by up to 3%, economists are predicting similar growth (2.5% to 2.8%) in the coming 12 months.
That growth may be temporarily checked by the latest decision by OPEC to cut oil output at the beginning of 2019. From reaching the lofty heights of $85 per barrel at the beginning of October, global oil prices have since fallen to just $53 per barrel at the end of the year. This prompted OPEC to announce it would be slashing production by 1.2 million barrels per day for the first six months of 2019. The UAE will play its part in the cuts by reducing output by 90,000 barrels per day initially.
However, experts were quick to stress there was no cause for concern and that the recent drop in price was not indicative of a wider, worrying trend. “Oil prices are set to rebound in Q1 2019 as the slump since October has been exaggerated and is not representative of where global demand and supply is found to be,” explained John Sfakianakis, head economist at Saudi Arabia’s Gulf Research Centre.Download PDF