Saudi min­is­ter says stock­piles aren’t drain­ing as ex­pected

New Straits Times - - Business / World - Bloomberg

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

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