Oil down cycle nearing end
riyadh — Saudi Oil Minister Khalid Al Falih said on Sunday that the current down cycle of crude prices is close to an end as market fundamentals improve.
“The current down cycle is nearing an end,” Falih told a joint Press conference with his Russian counterpart Alexander Novak after a Gulf ministerial meeting in Riyadh.
“Market fundamentals, in terms of supply and demand, have begun to improve,” Falih said.
“We are optimistic that oil prices will continue to improve in the future,” he said.
Qatar’s energy minister, Mohammed Al Sada, whose country holds the rotating presidency of the Opec oil exporting group, also said the “difficult phase is over”.
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.
Oil prices currently hover around $50 per barrel after hitting a 10year low of less than $30 in January, down from a peak of more than $100 in mid-2014.
Earlier, energy ministers from five Arab Gulf oil-producing nations met Sunday to discuss efforts to stabilise crude markets amid Opec’s drive to enlist Russia’s cooperation in limiting output to prop up prices.
Ministers from Saudi Arabia, Kuwait, Bahrain, Qatar and the UAE gathered in Riyadh for oil talks at the offices of the Gulf Cooperation
Market fundamentals, in terms of supply and demand, have begun to improve Khalid Al Falih, Saudi Oil Minister
Council secretariat. “Oil markets are on the way to being re-balanced,” Al Falih said at the start of the meeting. “Low oil prices are putting pressure on GCC countries’ development plans.”
london — We had BP’s “Beyond Petroleum,” now Saudi oil minister Khalid Al Falih is setting the scene for “Beyond Market Share.”
The so-called market share strategy it imposed on Opec in November 2014, where it decided to defend its dominance by pumping more crude, has worked. The war on high-cost oil is won. Now it’s time to win the peace.
You might ask how I can possibly argue the Saudis have won. After all, didn’t they just abandon that very same strategy without killing US shale, with their economy buckling under the pressure of sub-$50 oil?
I don’t see it like that. I never liked the simplistic view of a battle between Saudi and shale, where victory could only be secured by the industry’s destruction. It was always more subtle. As I’ve written before, the policy was a response to the Saudi realisation that, if oil stayed at $100 a barrel, Opec would have had to keep cutting supply to maintain prices — thereby creating room for high-cost oil producers. American shale was only ever the most visible part of that “enemy”, but not all of it and certainly not the most expensive.
As Al Falih said at last week’s Oil & Money conference in London, if Opec had cut output in November 2014 to support prices, it would have had to do so again in 2015 and 2016. Instead, its production has increased by 2.4 million barrels a day, excluding the impact of newly returned members Indonesia and Gabon.
Opec would never be able to kill shale entirely, only put it in hibernation, and that’s really all it needed to do. Much has changed in the two years since November 2014. Back then, US shale oil output was rising by about one million daily barrels each year. Now it has stagnated. Sure, growth will return as crude prices recover, but at $60 a barrel, it’s unlikely to reach anything like one million barrels a day.— Bloomberg