Falih: Oil down cycle ‘nearing end’, views are closer with Russia
Saudi looks to Russia to boost non-OPEC cooperation
RIYADH: Saudi Oil Minister Khalid Al-Falih said yesterday that the current cycle of falling crude prices is close to an end as market fundamentals improve. Oil prices are currently hovering at around $50 per barrel after hitting a 10-year low of less than $30 in January, down from a peak of more than $100 in mid-2014.
“The current down cycle is nearing an end,” Falih told a joint press conference with his Russian counterpart Alexander Novak yesterday after a Gulf ministerial meeting in Riyadh. “Market fundamentals, in terms of supply and demand, have begun to improve,” Falih said, adding: “We are optimistic that oil prices will continue to improve in the future.” Falih said he had invited his Russian counterpart Alexander Novak to meet Gulf Arab energy ministers in Riyadh as part of efforts to cooperate with non-OPEC members to stabilize the oil market.
“Russia is one of the world’s biggest oil producers ... and is one of the influential parties in the stability of the oil market,” Falih said at the opening session of the six-member Gulf Cooperation Council (GCC). Falih said Novak had welcomed the invitation, “as a clear indication of sincere desire to continue cooperation and coordination with the oil producing and exporting countries for more stability in the market.”
Novak had said on Friday he would take “some” proposals to the meeting in Riyadh. Last month in Algiers, the Organization of the Petroleum Exporting Countries agreed modest oil output cuts. The goal is to cut production to a range of 32.50-33.0 million barrels per day (bpd).
“The Algeria meeting last month was successful in pushing the path of cooperation between oil producing and consuming countries and included important talks between experts from OPEC countries and outside of OPEC about oil markets,” Falih said calling on his Gulf energy counterparts to work together as a bloc. Falih also said that the low oil price environment had led to a decrease in investments which could lead to a shortage in supply in the future and have a negative effect on the global economy.
Qatar’s energy minister, Mohammed AlSada, whose country holds the rotating presidency of the OPEC oil exporting cartel, also said the “difficult phase is over”.
“Although the market is heading to being balanced, it needs our joint effort, and we all agreed that we need to take measures to bring back this balance,” he said. Novak said he and his Gulf counterparts had discussed ways to “develop the best mechanism to solve the issue of stabilization”. “We have reached an unprecedented level in our relations and cooperation” with Saudi Arabia, he told reporters, adding that he agreed with Falih “to continue to work and remain in continuous contact to achieve... concrete mechanisms”. OPEC has invited Russia and key non-members to a meeting later this month as the cartel and Moscow seek to tighten cooperation to boost historically low crude prices. The invitation was announced after a meeting between top OPEC energy ministers and Novak in Istanbul, aimed at advancing joint efforts to bolster oil prices whose lows have hurt the highly dependent economies of crude producers. The cartel and Russia will meet today, ahead of the OPEC technical meeting in Vienna on October 28-29, to which Russia and others have been invited.
Last month at a meeting in Algiers, the cartel agreed its first production cut in eight years, although it remains to be seen how this will be complied with and implemented.
President Nicolas Maduro of OPEC member Venezuela was in Riyadh yesterday for talks a day after calling in Iran for increased cooperation between oil-rich nations to stabilize prices. Maduro, who is also due to visit Qatar on a Middle East tour, currently faces an economic and political crisis at home, compounded by the collapsing price of oil.