UAE economy: Quick View – Oil production up by 2.5% year on year

Event

Crude oil output remained at 2.73m barrels/day (b/d) in June, the same as in May, according to the International Energy Agency (IEA).

Analysis

The UAE’s growth in crude oil output is slowing after rapid expansion in 2011 12. Crude output averaged 2.69m b/d in the first half of 2013, up by 2.5% year on year. Production was slightly higher in the second quarter, at 2.72m b/d compared with 2.67m b/d in the first quarter. This is relatively muted compared with rapid growth of 8.4% in 2011 and 5.9% in 2012. However, these gains in part represented a bounceback after output was cut sharply, by more than 12%, in 2009 as oil prices plummeted during the global financial crisis.

According to the IEA, sustainable oil output capacity in the UAE was 2.9m b/d in June. The UAE wants to boost capacity to 3.5m b/d, but has put back several times the date by which it plans to reach this target. The target date is now 2020. We forecast that production will exceed 3m b/d in 2017 as the UAE continues to invest in expansion. However, we now forecast that oil prices will decline during the forecast period, dipping below US$100/b in 2017, owing to subdued demand growth and substantial additions to global supply. If oil prices were to start moving down more sharply there is a risk that the UAE, along with other OPEC members, might seek to cut production to support prices.

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