AL FALIH CONCERNED ABOUT THE RECENT VOLATILITY
Senior Reporter
Global oil markets are on the right track and will soon return to balance due to implementation of production cuts by Opec and other countries, Saudi oil minister Khalid Al Falih said in Abu Dhabi yesterday.
Opec and its allies including Russia are slashing production by 1.2 million barrels per day, starting from January 1, to rebalance oil markets and support prices.
Opec is cutting production by 800,000 barrels per day and non-Opec members by 400,000 barrels per day.
The minister however expressed concern about the recent volatility of oil prices.
“I remain convinced that we are on the right track and the oil markets will quickly return to balance. If we find that more needs to be done, we will do so in unison with our Opec and non-Opec partners,” Al Falih said at the Atlantic Council Global Energy Forum.
The cuts were necessitated by production levels in many countries and concerns pertaining to global oil demand.
Saudi Arabia and other countries have been decisive in reducing output and expected other countries to follow suit, according to Al Falih.
“We have already done it, we have done enough, we have Opec’s secretary general expects a high level of conformity to the production cut agreement that began on January 1.
“We have proved beyond reasonable doubt, since we started implementing the declaration of cooperation in January 2017, that parties in the declaration of cooperation, the 24 countries, are committed to this voluntary decision. There is no better way to assess their commitment to this voluntary decision other than in the implementation and the level of conformity.
“And we have seen by the time we met in June last year, we have gone past 100 per cent by far (in conformity). The market now has accepted the level of commitment of all the participating countries in the Opec and non-Opec declaration to their voluntary commitments.” been decisive in our action, not only the kingdom but other countries too,” he said. “We have heard from the emirates and I have talked repeatedly to my colleagues in Iraq, they have already taken action. Russia has started, slower than I’d like, but they have started. I am sure as they did in 2017, ultimately they will catch up and will be a positive contributor to rebalancing oil markets.”
Opec production in December was already more than 600,000 barrels per day lower than in November, the bulk of which was due to actions by Saudi Arabia, he added.
“We in Saudi Arabia, went beyond our commitment and have lowered production and exports in the last two months. As the new 1.2 million barrels per day cut materialises, we should start to see the impact positively reflected on inventories, which is of course the key metric for all of us to watch.”
The comments came as the global benchmark Brent edged higher to trade at more than $60 (Dh220) per barrel yesterday from around $50 per barrel two weeks ago. US crude West Texas Intermediate was at $51.59 per barrel.
Al Falih, however, expressed concern about the recent volatility and prevailing negative sentiment but said the present fundamentals are clearly trending in the right direction.
“Demand growth, we have to be reminded, remains healthy with forecasts not only for 2019 but beyond of 1.3 to 1.5 million barrels range while supply started to reflect already, two weeks into the new year, the impact of our decision to cut production by 1.2 million,” he said.