SAUDI ARABIA, RUSSIA OFFER UNITED FRONT
Saudi minister says stockpiles aren’t draining as expected
SAUDI Arabia and Russia, the architects of an oil production cut that has stabilised prices, presented a united front on compliance, just as rising United States inventories have sparked doubts about the Organisation of the Petroleum Exporting Countries (Opec) and non-Opec deal.
Khalid Al-Falih, the Saudi oil minister, acknowledged that global crude inventories aren’t draining as quickly as he expected, opening the door for an extension of the production cuts into the second half of the year. The potential rollover is a subtle yet significant shift from just six weeks ago, when the minister said that an extension probably wouldn’t be needed.
Al-Falih’s concern about the slow pace of stockpile reductions was echoed by Suhail AlMazrouei, the oil minister for the United Arab Emirates.
Since Opec and some of its rivals, including Russia, agreed to cut output in late 2015, oil prices have stabilised at around US$50 and US$55 a barrel, up from US$45 and US$50 a barrel before. Yet, prices are struggling to rise further as US crude stocks increase to record levels.
With the market starting to believe the cuts were backfiring by reviving US oil production, AlFalih and his Russian counterpart Alexander Novak called a news conference after a round of meetings to offer a united front, and insist the cuts will work.
“The market had low expectations, which we have exceeded by a large degree,” said Al-Falih.
“We are definitely on the right track and are picking up speed in terms of delivery.”
The US Energy Information Administration on Tuesday lifted its forecast for US crude oil production, saying output next year will top the all-time record set in 1970.
Output will average 9.21 million barrels a day this year, up from 8.98 million projected in February, said the agency. For next year, US production will rise to an average 9.73 million barrels a day, up from 9.53 million barrels projected last month, and it will top 10 million barrels a day in December 2018.
Saudi Arabia's energy minister Khalid Al-Falih