The oil market is expected to balance in the fourth quarter even as output from fellow OPEC members Libya and Nigeria as well as from shale oil producers is on the rise, according to Saudi Energy Minister Khalid Al-Falih.
The global effort to reduce crude production since the start of the year is helping fundamentals to move in the right direction though it will take time to see an impact on the market because oil inventories have risen over the past few years, he said in an interview with the London-based Asharq al-Awsat newspaper.
“The forecasts that the oil market will rebalance in the fourth quarter have taken into consideration the rise in shale oil production,” he said. The rise in crude production from Libya and Nigeria is posing no threat as “the level of increase from these two countries is still within the limits set by the Algeria agreement of 500,000 barrels a day,” he told the Saudi-owned daily.
Saudi Arabia and other members of the Organization of Petroleum Exporting Countries as well as producers from outside the group reached an initial deal in Algiers in September to cut production to curb the global glut and shore up prices. Libya and Nigeria were exempt from the deal when it was formalized later in the year. The six-month deal which started on January 1, was extended until March.
OPEC and its partners in the agreement for the global output cuts do not target any oil price and the volatility in the oil market is due to speculation, Al-Falih said.
Oil inventories stored on land and at sea are falling, he said. Oil stored on floating facilities in the sea are at their lowest since 2014 after they fell by 50 million barrels, while inventories in countries in the Organization for Economic Cooperation and Development dropped by 65 million barrels a day from their peak in July 2016, he said.
Market watchers only look at U.S. oil stockpiles “where decline rates in inventories are less than expected” and neglect to recognize stockpiles have fallen elsewhere, he said.For all the latest energy and oil news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.
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