The UAE is wasting little time capitalizing on its exit from OPEC, with crude production already climbing above 3.8 million barrels per day in June, its highest level in more than six years, as Abu Dhabi rapidly converts spare capacity into exports despite weaker oil prices.
Production has accelerated since the UAE formally withdrew from OPEC and OPEC+ on May 1, ending years of output restrictions that had limited its ability to fully utilize its production capacity.
Energy Minister Suhail Al Mazrouei said the UAE’s investments in upstream capacity meant the country needed to maximize returns rather than keep production offline, Reuters reported. ADNOC has spent tens of billions of dollars expanding production capacity to 5 million barrels per day, giving the UAE one of the world’s largest sources of immediately available spare production.
The production increase comes as oil prices have retreated sharply from their Middle East war highs. Brent crude has fallen to under $72 a barrel after briefly climbing above $120 during the conflict, while the return of Gulf exports and recovering tanker traffic through the Strait of Hormuz have renewed concerns about oversupply.
ADNOC has also adjusted its marketing strategy to support the production increase. Earlier this month, the company shifted the official selling prices for its offshore Upper Zakum, Das and Umm Lulu crude grades from a Murban-linked formula to the Dubai benchmark, bringing those medium-sour grades into line with competing regional crude streams. Reuters also reported that ADNOC has been offering discounted cargoes through tenders as it seeks to expand its customer base while additional volumes enter the market.
The UAE’s production growth stands in contrast to much of the rest of the Gulf. Although OPEC output rebounded sharply in June as producers restored barrels shut in during the Strait of Hormuz crisis, regional production remains below pre-war levels. Free from OPEC quotas, Abu Dhabi is now one of the few major producers able to continue increasing output even as oil prices weaken, putting it in a strong position to compete for market share in Asia.
By Charles Kennedy for Oilprice.com
