How to save the UAE from its worst oil price slump since 2010
A week after Saudi Arabia’s latest plunge into the US market, UAE officials say the country is looking to buy up as much of the oil it can, with no immediate plans to raise the price.
“We have the capacity to purchase up to 1.5 million barrels a day from the US.
This would be a major increase from the current amount of 0.7 million barrels,” said Sheikh Abdullah al-Nimr, UAE Minister of Petroleum.
“It’s the beginning of a new era.”
But for the UAE to buy more than the US is likely to mean higher prices, which could lead to a sharp fall in demand for the country’s crude.
The UAE has already cut prices by as much as 30% in the past few months.
Last month the price of a barrel of Brent crude plunged to US$42.60 a barrel.
“The price of oil is a product of supply and demand,” Mr Nimr said.
“Demand is rising.
We cannot have this situation where the supply is not there.”
The UAE government is already spending billions to prop up the economy after the collapse of the Saudi market.
The government announced a $2 billion fund for the development of oil fields in the Red Sea, and announced plans to build a new offshore oil platform in the Gulf of Oman.
The fund is part of a larger plan to boost the economy and boost jobs by 2026, when it aims to boost oil production from 6.5m barrels a year to 9.5million barrels a season.
But that is still far short of what the UAE needs to boost its domestic production.
It will also need to diversify its export business, as the country does not have enough oil fields.
“This is a massive problem, but it’s not the only one,” Mr Najib bin Abdulaziz Al Khalifa, the head of the National Oil Company, told Reuters news agency on Tuesday.
“What we need to do is diversify our exports to meet our needs.”
He said the UAE was currently importing enough oil to supply its economy for another five years, but did not know if it would be able to do so this year.
“If we do not diversify, then the country will be stuck in a long, slow, and difficult economic downturn,” Mr Khalifa said.
A year ago, the UAE imported 7.5% of its oil needs.
But as the market has recovered from the Saudi crash, exports have plummeted to around 2% of the total demand.
Last year, the government spent $1.5 billion on building a new pipeline from Dubai to Port Harcourt, where it hopes to export a third of its crude oil by 2027.
In addition to the new pipeline, the new plan also involves an offshore oil production facility to export 1.4 million barrels per day to Europe, and to China, where there is a need to increase oil production.
Saudi Arabia is a major buyer of US oil, and has been doing so for years.
Saudi Arabian Oil Company (Saracens), the state-owned oil giant, has been the UAE’s largest foreign buyer of oil.
“For a long time, we have been selling a lot of oil to the world and selling a big share of the market to Saudi Arabia,” said Abdullah al Muhandis, the president of the Gulf oil company, Al Khaleej Times.
“Saraca [the UAE] wants to get back to that.”
But Saudi Arabia has been ramping up its production, and Saudi Aramco, the countrys largest oil company by market value, has increased output by more than 40% in a year.
That means that while the UAE is already exporting a significant amount of its own oil, the Saudis are pumping more than twice as much.
“There’s no reason for the Saudis to pump more oil,” Mr al MuHandis said.
The price of Brent oil, an international benchmark, has fallen by more the past week to $42.70 a barrel from $54.50 a barrel a day earlier.
It is now $30 a barrel lower than the Saudi average, and it is expected to fall further as Saudi Arabia seeks to boost production.
“I think they are trying to get the price down to zero,” Mr MuHands said.
It was also revealed that Saudi Aramcos new flagship refinery in Dubai is to produce an average of 1.1 million barrels of oil a day for the next five years.
But the refinery is also expected to produce between 5 and 6 million barrels an hour for five years from 2020 to 2030.
“They have to keep pumping because they are in a crisis,” Mr Al MuHandas said.
Mr al-MuHandis warned that the government was in a very bad situation.
“My message to the government is this: don’t be in a position where you have to take all these risks to help the economy,” he said.