Falih says oil mar­ket at end of down­turn

Non-OPEC not only will­ing to freeze but cut out­put

Kuwait Times - - BUSINESS -

LON­DON: Saudi Ara­bia’s energy min­is­ter gave an up­beat mes­sage to an au­di­ence of in­dus­try ex­ec­u­tives yes­ter­day, say­ing the oil mar­ket was at the end of a down­turn and pro­ducer ac­tion to limit sup­ply would help it im­prove fur­ther. Khalid AlFalih also told the an­nual Oil and Money con­fer­ence in Lon­don that non-OPEC coun­tries were show­ing a will­ing­ness to freeze and even cut sup­plies along­side the Or­ga­ni­za­tion of the Pe­tro­leum Ex­port­ing Coun­tries. “Mar­ket forces are clearly work­ing af­ter a test­ing pe­riod of sub$30 prices. The fun­da­men­tals are im­prov­ing and the mar­ket is clearly bal­anc­ing the sup­ply and demand equa­tion,” Falih said.

“With this con­tri­bu­tion of im­prov­ing fun­da­men­tals, re­bal­anc­ing and the joint ac­tion by OPEC and non-OPEC alike, I fully ex­pect mar­ket con­di­tions to con­tinue im­prov­ing.” Oil is trad­ing near $52 a bar­rel, less than half its level in mid2014 when prices be­gan to slide due to over­sup­ply. The down­turn deep­ened af­ter OPEC in Novem­ber 2014 dropped its tra­di­tional role of cut­ting its sup­ply to sup­port prices. Ap­pointed as energy min­is­ter for the top OPEC oil pro­ducer and world’s big­gest ex­porter ear­lier this year, Falih has over­seen a re­turn by the group to man­ag­ing sup­ply.

OPEC agreed in Al­giers on Sept. 28 to re­duce pro­duc­tion to a range of 32.50 mil­lion to 33.0 mil­lion bar­rels per day, which would be its first out­put cut since 2008. An­other meet­ing on Nov. 30 is set to firm up de­tails of the ac­cord. Falih said that by freez­ing pro­duc­tion or slightly re­duc­ing it, OPEC wanted to sig­nal to the mar­ket that it wanted to lower in­ven­to­ries and en­cour­age in­vest­ment. Spend­ing has fallen due to the price drop, rais­ing con­cern about sup­ply in the medium term. “I am happy to see more rigs com­ing back,” he said, ad­ding that un­con­ven­tional oil pro­duc­tion was im­por­tant for help­ing to meet global demand growth.

A chal­lenge for OPEC is to work out how to man­age the as­pi­ra­tion of mem­bers whose out­put has been cut in­vol­un­tar­ily to pump more. Out­put lev­els are not known in some coun­tries that have dis­rup­tions, Libya, Nige­ria and Venezuela, Falih said. “We want some clar­ity on where those pro­duc­ers are as we ap­proach the meet­ing in Novem­ber,” he said. OPEC wants non-member pro­duc­ers such as Rus­sia to con­trib­ute to the sup­ply lim­it­ing ef­fort and Falih was op­ti­mistic that they would de­liver. “NonOPEC is show­ing will­ing­ness to join, I won’t men­tion names, to not only freeze but cut pro­duc­tion,” he said. “Their con­tri­bu­tion to sta­bi­liza­tion could be as sig­nif­i­cant as those made by OPEC mem­bers.” — Reuters

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