Khobar- Saudi Arabia’s Energy Minister Khalid al Falih, in an interview at the World Economic Forum in Davos, said on Tuesday that the oil cut deal struck between Oil Producing and Exporting Countries (OPEC), will not be necessary beyond June. The window of opportunity provided is more than enough time for market forces to take over, breakdown the oil glut and allow for market recovery.
OPEC had initially suggested it could extend the six-month deal beyond June, yet Falih said Monday there may be no need. He said Saudi Arabia has already brought output below 10 million barrels a day — the lowest in almost two years — while Russia is ahead of schedule in implementing production cuts.
“The oil market is moving in the right direction,” Falih told Bloomberg on Tuesday, predicting global demand growth close to 1.5 million barrels a day this year.
Twenty-four oil-producing nations, led by OPEC and Russia, agreed on Dec. 10 to reduce output collectively to end a three-year crude surplus that has weighed on prices. Russia and other key exporters outside OPEC have said they will also cut output.
“We don’t think it’s necessary given the level of compliance,” Falih said at an industry event in Abu Dhabi. “My expectations (are) … that the rebalancing that started slowly in 2016 will have its full impact by the first half.”
Investors have doubted that OPEC and its allies can trim output enough to push up prices.
Russian oil and gas condensate production averaged 11.1 million bpd for Jan. 1-15, two energy industry sources said on Monday, down only 100,000 bpd from December. Russia has committed to a 300,000-bpd cut during the first half of 2017.
“Cuts by OPEC and non-OPEC countries have just started and it will take some time for them to filter through,” said Bjarne Schieldrop, chief commodities analyst at SEB Markets in Oslo.
“We do not really expect the oil price to strengthen much more in the first quarter of 2017.