C O N F I D E N T I A L ABU DHABI 000652

SIPDIS

DEPT FOR NEA/RA, NEA/ARP, INR/EC, EB/CBA, S/CT,
EB/ESC/IEC/EPC FOR MCMANUS
USDOE FOR INT'L AFFAIRS -- COBURN, CALIENDO, AND HUTTO
USDOC FOR 1000/OC/
USDOC FOR 4520/ITA/IEP/ONE
USDOC FOR 4530/ITA/MAC/ONE/DGUGLIELMI
4500/ITA/MAC/DAS/WILLIAMSON
3131/CS/OIO/ANESA
NSA FOR RICK KARP

E.O. 12958: DECL 03/09/09
TAGS: EPET PGOV BEXP ENRG ECON EINV TC
SUBJECT: UAE OIL MINISTER: "OPEC MAY REVIEW PRODUCTION
CUTS AT ITS MARCH 31 MEETING"


1. (U) Classified by Deputy Chief of Mission Richard

A. Albright, for reasons 1.5 (B) and (D).


2. (U) UAE Oil Minister Obaid Al-Nasseri told
reporters last week that OPEC would stand by the April
1 production cuts, but review its policy at the OPEC
meeting at the end of March. Indeed, the UAE already
has notified its major customers under term contract
that it will reduce the volume of crude available in
April in line with the OPEC mandate. The cuts also
coincide with planned maintenance work on the crude
production facilities at Das Island, which produces
the Umm Shaif and Lower Zakum crudes.


3. (C) In a March 8 meeting with Econoff, the chief
adviser to the UAE Oil Minister, Dr. Ibrahim Ismail,
said that "something would have to be done" during the
March 31 OPEC meeting if oil prices remained high
during the next two weeks. He believes that OPEC
should delay the April 1 production cuts until later
this year to allow oil prices to return to the $22-$28
range, "but there are many oil ministers against
revising the existing plan."


4. (C) Dr. Ibrahim said that some OPEC delegates
argue that the market is balanced, and OPEC's
projections show overall crude supply for the year
will exceed demand by more than 1.5 million barrels
per day. Others claim that the decreased value of the
dollar (by about 30 percent vis- vis the Euro) means
that the real price of crude oil remains within the
$22-$28 OPEC price band. Still others blame the USG
for driving up oil prices by increasing the stocks of
the Strategic Petroleum Reserve by 7 percent during
the last year. Dr. Ibrahim said he can only speculate
as to the position OPEC states will take on March 31;
he reminded Econoff that the September meeting proved
that OPEC Oil Ministers still "had the guts" to
surprise everyone.


5. (U) Coincidentally, the UAEG released figures
March 8 that its windfall from high oil prices in 2003
caused GDP to reach a record $74.3 billion last year -
- the most prosperous economic and fiscal year since
the UAE's founding in 1971. Official figures showed
the UAE's real GDP grew 4.7 percent in 2003.

Wahba