Huston, United States – Saudi Energy Minister Khalid al-Falih said on Tuesday that oil market fundamentals were improving after an agreement struck with top oil producers to curb supply and end a two-year glut took effect.
More so, it was premature to consider whether the cuts should be continued into the second half of the year so Falih said that those discussions would be held in May, when OPEC next meets, he added.
“At the moment it´s a matter of monitoring the markets and conformance of participants, and depending upon our assessment of the first half of the year, we will decide with our partners what to do for the second half,” Falih said.
Speaking before a group of corporate executive attending an energy conference in Huston, United States, Falih said that Saudi Arabia had cut beyond what it had pledged in the agreement and brought the kingdom’s output below 10 million bpd.
Global oil demand would grow by 1.5 million bpd in 2017, and increased output from the United States, Brazil and Canada would be more than offset by natural declines in aging fields, he said.
“There is… cause for cautious optimism as we see the ‘green shoots’ of the recovery,” Falih told energy executives and oil officials gathered at the CERAWeek industry conference in the US energy capital of Houston.
Benchmark Brent crude futures closed at $55.92 a barrel on Tuesday, and are up more than 10 percent since the output curb deal was struck in November.
Still, he cautioned against any “irrational exuberance” among investors. “We should not get ahead of the market,” he said.
Oil inventories worldwide had fallen “slower than I thought,” in the first two months of the year, Falih told energy executives and oil officials gathered at the CERAWeek industry conference in Houston.
Inventories in developed countries remain about 300 million barrels above the norm, he said.
It was premature to consider whether the cuts should be continued into the second half of the year, he said. Those discussions would be held in May, when OPEC next meets, he added.
In a joint news conference later on Tuesday, Falih, Russian Oil Minister Alexander Novak, Mexican Deputy Secretary of Energy Aldo Flores, Iraqi Oil Minister Jabar al-Luaibi and OPEC Secretary General Mohammed Barkindo, said they were happy with the results of the agreement.
Russia was fully committed to the agreement and called on all countries to comply 100 percent with their agreed reductions in production, Novak said.
Greater price arbitrage between east and west oil markets that “indicate the cuts are biting,” Falih said. US crude cargoes have increasingly flowed to Asian buyers as the market has tightened.