Saudi Arabia’s oil minister said that the supply cuts agreed by Opec and non-Opec countries at the end of last year may not need to be extended beyond June, as rising demand and strong compliance should have pushed the market towards balance by then.
Khalid al Falih, speaking at an industry event in Abu Dhabi, struck a bullish pose saying the cuts, which began on January 1, would have their “full impact by the first half” of 2017.
“We don’t think it’s necessary given the level of compliance…and given the expectations of demand,” Reuters reported.
“Based on my judgement today it’s unlikely that we will need to continue (the agreement) – demand will pick up in the summer and we want to make sure that the market is supplied well. We don’t want to create a shortage or squeeze.”
He added, however, that the group could still extend the six-month deal “if there was a need”.
Brent crude, the international oil benchmark, was up 38 cents at $55.83 a barrel by 10am London time while US benchmark West Texas Intermediate gained 32 cents to $52.69 a barrel.
Algeria said it’s lowered production more than promised
The only reason to lower production below the quota is if you can’t meet the quota.
Many of the promised OPEC cuts are seasonal slowdowns that were going to happen anyway. OPEC thinks it can bluff the market into believing it’s all voluntary and that they’re prepared to do more if necessary. So far, it’s working.
Meanwhile, Russia says its production will depend on the weather but it’s starting to lower output inline with what they promised to OPEC. Along the same lines, natural declines in Russian production are being touted as cuts.
Saudi Arabia has already made more than its agreed share of output cuts and is confident that Opec’s deal with non-Opec members to trim production would hold, its oil minister said.
Khalid al-Falih said “we have already exceeded it” when asked about the kingdom’s participation in the recently implemented deal among 25 nations to trim output to support prices.
Addressing the Atlantic Council Global Energy Forum in Abu Dhabi, Mr Falih said he was confident that the deal would return the market to balance more quickly.
Saudi Arabia, which bears the heaviest load of Opec’s 1.2m barrel a day cut, has pledged to rein in output by more than 480,000 barrels a day to just above 10m barrels a day. With non-Opec producers, the aim is to reduce output by 1.8m barrels a day.
“I believe the agreement between Opec and non-Opec will hold,” he said, rejecting speculation that compliance would be weak.
US oil production has turned a corner after a long period of weak petroleum prices, the government said, with volumes rising for the first time since early 2015.
The Energy Information Administration forecast that oil output from the US will increase 1.3 per cent to 9m barrels per day in 2017, abandoning an earlier prediction of a 0.9 per cent fall.
In the first forecast for 2018 in its monthly Short-Term Energy Outlook, the statistical agency said US crude production will rise another 3.3 per cent, or 300,000 b/d, to 9.3m b/d. Production hit bottom last September, EIA said.
“The general decline in US crude oil production that began almost two years ago is likely over, as higher average oil prices and improvements in drilling efficiency are giving a boost to output,” said Adam Sieminski, the EIA’s administrator.