'Oil Prices Dictated By Market, Not OPEC Members', Says UAE Minister And Former OPEC Conference President

Suhail Mohamed Faraj Al Mazrouei, Minister of Energy and Industry, has said that OPEC and its members "don’t control" oil prices and that the market "dictates" them. "What OPEC strives to achieve", he added, "is a balanced oil market that is fair for both consumers and producers, and encourages the many trillions of dollars of investment that is needed to secure future production."

In an opinion piece written to mark the end of his tenure as President of the OPEC Conference, and to shed light on the organisation’s achievements during 2018, the UAE Energy Minister highlighted that one of the most notable achievements of 2018 was undoubtedly the progress made in developing a charter between OPEC and its non-OPEC partners to continue collaborating in the years ahead.

He noted that this landmark pact was initialed in December at the 175th OPEC Conference, adding that this is an important step in a relationship that will continue to evolve and flourish into the future.

He also stated that the UAE has been a proud member of OPEC for over 50 years, and that by working with likeminded partners, both within and outside of the OPEC organisation, the goal of a more stable, less volatile oil market can be pursued.

Reflecting back to December 2016 when OPEC and its partners signed the ‘Declaration of Cooperation’ - a voluntary agreement to adjust production levels and thereby remove excess inventory overhang – Al Mazrouei said that the organisation’s goal was to deliver lasting and sustainable stability to the oil market in the interest of both producers and consumers.

In this regard, he added, that "fast forward to mid-2018 and inventory overhang had been reduced, OPEC and its partners were complying well above their committed targets, and there was a sense of optimism in our industry again. This was evident at OPEC’s 7th International Seminar, which was held in June at the Imperial Hofburg Palace in Vienna."

On 1st December, 2017 and during OPEC's 173rd meeting, Al Mazrouei has been elected as president of the OPEC Conference for one year, with effect from 1st January, 2018.

The following are Al Mazrouei's comments in full, "Throughout 2018, I was honoured to hold the role of President of the OPEC Conference on behalf of the United Arab Emirates. This important position rotates annually amongst the permanent member countries of the OPEC organisation.

"It was a particular privilege for me to hold this Presidency during the Year of Zayed, a year in which we celebrate the memory of our Founding Father, the late Sheikh Zayed bin Sultan bin Zayed Al Nahyan, of blessed memory, a leader whose values embody and inspire our nation and its people.

"The values of dialogue, respect and collaboration, which were dear to Sheikh Zayed, proved equally as important to OPEC and its partners in 2018, as we worked together to bring greater stability to the oil market following a period of uncertainty and distress.

"If I reflect back to December 2016 when OPEC and its partners signed the ‘Declaration of Cooperation’, a voluntary agreement to adjust production levels and thereby remove excess inventory overhang, our goal was to deliver lasting and sustainable stability to the oil market in the interest of both producers and consumers.

"Fast forward to mid-2018 and inventory overhang had been reduced, OPEC and its partners were complying well above their committed targets, and there was a sense of optimism in our industry again. This was evident at OPEC’s 7th International Seminar, which was held in June at the Imperial Hofburg Palace in Vienna.

"Close to 1,000 participants from over 50 countries attended the Seminar, which featured a rich array of presentations and panel discussions covering critical topics from technology breakthroughs, to the global economy, and global oil market balance metrics. Such events provide an important forum for policy makers and industry leaders to discuss trends, opportunities and challenges, and to share knowledge and experience.

"Engagement and dialogue are important priorities for OPEC and, as President of the OPEC Conference, I was honored to attend a wide range of events and meetings with a broad cross-section of stakeholders throughout the year. From IP week in London, to the IEF Ministerial meeting in New Delhi, India, CERA Week in Houston, the Stampede Investment Forum in Canada, and ADIPEC in Abu Dhabi, I saw first-hand the significant efforts of many countries, organisations and individuals to deliver a more stable and balanced oil market.

"What struck me in all of these engagements was the tireless commitment and positive intent of so many people. It’s clear that oil and gas continues to play a critical role in driving economic growth and development, and it will do so for many years to come.

"That said, as recent months have shown, despite so much hard work and effort, our industry is global, it is dynamic and it is constantly changing. We can never be complacent. Only through careful monitoring and analysis of supply and demand fundamentals and by working collaboratively to assess and where necessary address market conditions will we achieve our long term goal.

"One of our most notable achievements of 2018 was undoubtedly the progress we made in developing a charter between OPEC and its non-OPEC partners to continue collaborating in the years ahead. Initialed in December at the 175th OPEC Conference, this is something that would have been unthinkable when we began our efforts in 2016. However, after two years of working together, of building rapport and understanding, we were able to progress this landmark pact.

"This is another important step in a relationship that I am sure will continue to evolve and, I hope, flourish in the years ahead. The UAE has been a proud member of OPEC for over 50 years, and I am confident that by working with likeminded partners, both within and outside of the OPEC organisation, we can continue to pursue our goal of a more stable, less volatile oil market.

"One question that I was frequently asked in 2018, is was what price does OPEC, or the UAE, want for oil? What’s the right price? What’s a good price? And as my friends in the media will by now know, my answer is always the same. OPEC and its members don’t control the oil price. The market dictates the oil price. What OPEC strives to achieve is a balanced oil market that is fair for both consumers and producers, and encourages the many trillions of dollars of investment that is needed to secure future production.

"This was a consistent theme in all of my addresses throughout the year. Every major forecast show that oil will remain a central component of the world’s energy mix for the foreseeable future, and, if we to avoid future volatility, which is unhelpful for both consumers and producers, we must invest now, so that we meet future demand needs. In OPEC’s World Oil Outlook (WOO) 2018, oil-related investments across the upstream, midstream and downstream are estimated at around US$11 trillion in the period to 2040.

"We should not forget that more than a trillion dollars of CAPEX cuts were made during the recent industry downturn. As we learnt from previous market cycles, such pronounced declines in investment are a serious threat to future supply. It’s therefore important that we continue to invest, especially in larger long-cycle projects, to maintain ample supply and a capacity buffer, which can be used when needed to address short-term market needs.

"In summary, at the end of what has been a very busy but insightful year, I would like to thank the OPEC Secretary-General, Mohammad Sanusi Barkindo and his team for all of their hard work and support, recognise the significant efforts of my Ministerial colleagues, in particular Khalid A. Al-Falih, Saudi Arabia's Minister of Energy, Industry & Mineral Resources and Alexander Novak, Minister of Energy of the Russian Federation, and wish my counterpart, Manuel Salvador Quevedo Fernandez, People's Minister of Petroleum of the Bolivarian Republic of Venezuela every success in his role as President of the OPEC Conference in 2019.

"As we look to the future, I will reiterate the comments of Barkindo who stressed that there are 'Three C’s' that will be critical to future success: Collaboration. Collaboration. Collaboration."