In the previous month, the UAE declared that it would not join Saudi Arabia in making voluntary oil production cuts claiming that the stakes by the Saudis are enough to balance the markets.
Besides, the UAE got a massive concession from OPEC by an upward revision of its allotment, increasing its production by 200,000 barrels per day in 2024 to 3.2 million barrels.
But the UAE will immediately have to reap the rewards of its cunning in 2024. However, the oil prices have mounted about 15% after Saudi Arabia’s voluntary cuts of 1 million barrels per day. Moreover, Saudi Arabia is doing all the heavy lifting in outgrowth, but the UAE benefits the most.
Besides, the UAE has plans to ramp up its crude production capability to five million barrels per day by 2027, which is above the OPEC quota of 3mb/d.
Victor Katona, the head of crude analysis at Kpler, has told Middle East Eye, ” Saudi Arabia is cutting massively, and the UAE has cut to the bare minimum. The result is that Saudi Arabia is doing all the work, and the UAE has oil prices 15 percent higher than they were a month ago. This, by any means, the UAE is the big winner this summer”.
The situation is ironic, considering the UAE is much richer than Saudi Arabia’s per capita.
Deeper Saudi cuts?
As it tries to goose oil prices, the UAE might see its revenues rise once more of Saudi Arabia decides to make deeper production cuts.
Last month, several commodity experts predicted the Saudis would prolong its voluntary production cut. A week later, Saudi Press Agency published assurance that the country will extend its 1 million barrels per day oil output cut into September, but with the nuance that it “can be extended or extended and deepened.” Saudi Arabia has signaled a willingness to make deeper cuts if the previous ones take too long to achieve the desired impact.
However, commodity analysts at Standard Chartered have wagered that Saudi Arabia will not deepen its cuts because crude inventories are likely to decline going forward. Most energy experts also have anticipated that global oil markets will gradually tighten, boosting the prices as the months and quarters roll on.
Moreover, The International Energy Agency In Paris predicted an oil shortage of around 1.7 million barrels daily during the year’s second half.
The analysts have also projected that global inventories will fall by 310mb by the end of 2023 and another 94mb in the first quarter of 2024, thus increasing the oil prices. StanChart states Brent prices will increase to $93/bbl in the fourth quarter.
