Any attempt by US shale and other oil producers to boost output this year will backfire and lead to lower prices, according to the energy minister of the United Arab Emirates (UAE).
Oil prices have surged in the past two months with the development of coronavirus vaccines. They jumped again last week when Saudi Arabia said it would unilaterally cut crude output by 1 million barrels a day in February and March, a move the kingdom described as a “gift” to other producers.
That led the International Energy Agency to state that shale firms (whose output plunged last year when the virus spread and demand for energy crashed) would again be profitable.
But with demand still fragile, they “are wise not to jump the gun and overproduce during the recovery year,” UAE Energy Minister Suhail Al Mazrouei said in an interview before a forum run by Dubai-based consultancy Gulf Intelligence. They “need to be careful not to flood the market.”
Shale companies need to confident that prices will stay above $45 a barrel before they ramp up output, Mele Kyari, the managing director of Nigeria’s state oil company, said in a separate interview.
Non-shale producers have plenty of spare capacity that “can be easily kicked in to the market,” he said. “If that happens you lose money. Nobody wants to lose money, so they will be very cautious.”
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