Marzouq: Oil market is starting to rebalance
Oil markets have already begun to rebalance after strong signs that producers are complying with output cuts, Kuwaiti Oil Minister Essam Al-Marzouq said yesterday. “We are confident that rebalancing in the oil markets has already started,” Marzouq said. “We expect a positive impact on the market by the end of the first quarter of 2017,” he told the Petroleum Economist GCC Strategy Forum organized by Petroleum Intelligence.
Marzouq said that signs indicate that OPEC and non-OPEC producers who agreed in December to reduce output by a total of 1.8 million barrels per day “are complying with their commitments to cut”. Marzouq heads a five-country committee tasked with monitoring the implementation of the landmark deal. The committee met in Vienna on Sunday and said that compliance with the sixmonth accord, which took effect on Jan 1, had been very encouraging. The aim is to reduce a global glut that has depressed oil prices and blown a huge hole in the public finances of producer nations, despite being good news for consumers.
Marzouq said that compliance with the cuts “represents a guarantee for the price to recover to levels that encourage investments and ensure that crude stocks return to normal levels”. The minister said that there have been announcements from several countries including OPEC kingpin Saudi Arabia that they have already completed their cuts. Kuwait has also fully complied with the reduction while Russia has cut 100,000 barrels per day in January and plans to extend that to 300,000 bpd soon, Marzouq said. He expected oil prices to range between $55 and $60 a barrel throughout 2017.
Marzouq predicted that the market will suffer from a shortage in the supply of crude oil in the future. “Kuwait is keen to invest in the development of cleaner fuels in addition to the development of petrochemical products that meet the requirements of preserving the environment by investing in projects to expand its refining capacity inside and outside Kuwait,” he said. “Kuwait is keen to find new sources of energy to meet the growing needs of fuel in power plants with urbanization and population expansion in the state by increasing the exploration and production of free natural gas and importing liquefied natural gas,” he added.
Nizar Al-Adsani, Deputy Chairman and chief Executive Officer of Kuwait Petroleum Corporation, said the drop in oil prices has become a prominent feature of the market and the decline is expected to last longer. Adsani added that the 2030 strategy of the Kuwaiti oil sector covers a wide variety of functional areas and includes a detailed roadmap to support Kuwait’s development plan. “The plan includes a full program to improve the role of the oil sector to support Kuwait’s economy while helping to provide jobs and training for Kuwaitis and diversify sources of income,” he explained.
Adsani stressed KPC focuses on the petrochemical sector as a way to diversify sources of income, and is expected to spend KD 35 billion over the next five years starting from the fiscal year 2017-2018 on oil projects. He pointed out that the 2030 enterprise strategy includes the launch of major projects, including investment in the field of refining and petrochemicals outside Kuwait, the Zour refinery project, the clean fuel project and increasing oil production capacity to reach 4 million barrels per day by 2020.