By Adedapo Adesanya
The crude oil market was bullish on Tuesday as major producers like Saudi Arabia and the United Arab Emirates looked unlikely to be able to boost output significantly, further propelling a tight market.
Brent crude futures gained $1.19 or 1 per cent to trade at $116.28 per barrel while the United States’ benchmark, West Texas Intermediate (WTI) crude gained 96 cents or 0.9 per cent to sell at $110.53 per barrel.
The UAE and Saudi Arabia’s oil production is nearing their limit, French President Emmanuel Macron told his US counterpart, Mr Joe Biden during the G7 meeting this week.
According to Reuters, the French President was referring to a conversation he had with the ruler of the Emirates.
According to the cited conversation, the UAE was already “at maximum,” Mr Macron told Mr Biden.
UAE’s oil minister, Mr Suhail al Mazrouei, later clarified that the UAE was in fact pumping close to the baseline set for it by an agreement under the Organisation of the Petroleum Exporting Countries and allies (OPEC+) with its baseline at 3.168 million barrels per day.
“In light of recent media reports, I would like to clarify that the UAE is producing near to our maximum production capacity based on its current OPEC+ production baseline,” Mr Al Mazrouei said.
Saudi Arabia’s production quota was raised by 114,000 barrels per day in June and will be raised another 170,000 barrels per day in July, but the OPEC quota expires at the end of August—after which time Saudi Arabia would be free to ramp up production as it sees fit.
This is worrying since Saudi Arabia is believed to have more than 1 million barrels per day in a spare capacity that can be tapped within three months.
If it can indeed only add 150,000 bpd to current levels of production as dictated by capacity, this means the world’s spare oil production capacity is much smaller than previously believed.
Meanwhile, leaders of the G7 group of wealthy nations said they will explore a potential ban on transporting Russian oil that has been sold above a certain price.
Also supporting oil prices, analysts said that political unrest in Ecuador and Libya could tighten supply further.
Libya’s National Oil Corporation (NOC) said it might have to declare force majeure in the Gulf of Sirte area within the next three days unless production and shipping resume at oil terminals there.
These developments have helped relegate recession fears that weighed on prices over the previous weeks.
