Saudi Arabia's Falih Warns of Crude Shortage by 2020

There could by a shortage of oil supply by 2020 if investment flows continue at their current rate, Saudi Arabia's Energy Minister Khalid al-Falih has warned.

Al-Falih told CNBC that prices today are "comfortable" but he worries about future investment.

"I believe if the investment flows that we have seen the last two or three years continue in the next two or three years, we will have a shortage of oil supply by 2020.

"We know, from what we have seen in the last couple of years, that prices around the current level and below are not attracting enough investment. We know the level of decline, natural decline, that existing production is undergoing, and we know that demand is picking up at 1.2 to 1.5 million barrels a year.

"So between increase in demand and natural decline, we need millions of barrels every year to be brought to the market, which requires massive investment," he noted.

Earlier this week, al-Falih told reporters in the United Arab Emirates that oil prices would rebalance by the end of the first half of 2017, causing markets to trend upwards. 

However, speaking to CNBC, he said that, while a return to former highs of $100 per barrel is unlikely, prices are yet to reach the right "equilibrium".

Saudi Arabia and other OPEC countries recently agreed a deal to better manage their supply and demand levels by reducing production by almost 4.5%.

This is part of Saudi Arabia's wider strategy to diversify its economy away from oil production.

Known as 'Vision 2030', the plan aims to make the country "dramatically different", said Falih, by scaling down the government and scaling up the private sector, both with domestic and international companies. 

"Saudi Arabia in 10, 15 years will be quite, in a positive way, dramatically different than the Saudi Arabia of the past.

"It will be quite a diverse economy, with a diverse energy mix, as well, with a young workforce that is productive and contributing for their own well-being, and for Saudi Arabia, and indeed for our region and beyond."