S. Arabia’s Falih: 50% of Excess Oil Remain

S. Arabia’s Falih: 50% of Excess Oil RemainS. Arabia’s Falih: 50% of Excess Oil Remain

The world will still have a surplus of oil by the end of March 2018, Saudi Arabia’s energy minister said on Thursday, signaling a willingness to extend output cuts when OPEC meets at the end of November on whether to extend caps well into 2018.

Khalid al-Falih also said he did not want oil prices to rise too fast and too soon to shock consumers, adding that the exit from production cuts would be gradual to make sure market reaction is smooth, Reuters reported.

“We need to recognize that by the end of March we’re not going to be at the level we want to be which is the five-year average, that means an extension of some sort,” he said, referring to inventory levels in the developed world.

“We have gone over 50% in reducing excess inventories but that means we still have some excessive inventories that we need to drain,” he told journalists on the sidelines of the UN climate conference in Bonn, Germany.

“We don’t want any spikes in price that shock the market. We don’t want any price movements that are unhealthy for demand. We don’t think we’ve seen any of that yet but that’s a potential, especially if God forbid we have disruptions in any major country. We’re hopeful none of this will happen.”

Asked about the most recent spike in oil prices to a two-year high this month, he said, “I am not distracted by short-term gyrations in prices and I certainly don’t spend time looking at hedge funds and the flows into financial investment instruments.”

Falih said it was too early to make an assessment on a possible extension to OPEC’s global oil output cuts now, but said Saudi Arabia favors making an extension decision at the next OPEC meeting at the end of the month.

“The November 30 meeting will be an important milestone to announce the way forward. My preference is to give clarity to the market and announce on November 30 what we’re going to do.”

Asked whether Russia was committed, Falih said, “I have had extensive consultations with my Russian colleagues and I will have some more in the next two weeks, but I know one thing is that the Russians are committed to working with Saudi Arabia and with the rest of the 24 countries that have come together last year.”

Asked what OPEC’s exit strategy from the supply control deal was, Falih said it would be one of gradual adjustment.

“We’ve done our reduction in a gradual way at the beginning of this year and it has worked beautifully so far.”


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