While a decision to drive down crude inventories “gently” has been taken by consensus among OPEC and allied oil producers, Saudi Arabia would also be responsive to the demands of what is being described as a fragile market, said the Minister of Energy, Industry and Mineral Resources of Saudi Arabia Khalid Al-Falih on Sunday.
The main point of discussion at a ministerial panel meeting on Sunday was the initiating a possible rollover in the second half of 2019 of output curbs which was agreed to by OPEC and non-members, Falih said. He however said that “things can change by June”.
“This second half, our preference is to maintain production management to keep inventories on their way declining gradually, softly but certainly declining towards normal levels,” he told a news conference after the panel meeting.
A consensus decision to bring down crude output by 1.2 million barrels per day (bpd) from January 1 for a period of six months was taken by members of OPEC, Russia and other non-member producers – the alliance is known as OPEC+. This decision was taken to to prevent buildup of inventories and further weakening of crude prices.
The members had discussed an easing of production cuts and the supply situation would become more clear within a month which would include those from countries under sanctions, said Russian Energy Minister Alexander Novak earlier.
The rising concerns about supply disruptions while inventories increase reflects conflicting data which makes the market “very fragile”, Falih told reporters. He however added that the future weeks and months would show a “comfortable supply situation”.
It was not sustainable to implement high compliance with the agreed cuts and over-conformity by some countries “can be reversed in June”, he said.
Saudi Arabia would stay within the proposed limits if a decision were taken at that meeting to roll over cuts, the minister said. The Saudi oil output in May and June was planned to be 9.8 million bpd, he said.
“It is critical that we don’t make hasty decisions — given the conflicting data, the complexity involved, and the evolving situation,” Falih said, describing the outlook as “quite foggy”.
“But I want to assure you that our group has always done the right thing in the interests of both consumers and producers; and we will continue to do so,” he added.
Saudi Arabia would maintain its OPEC production target for July, Falih said.
It was possible for filling the market gap by the current producers and revoking or relaxing supply cuts was not “the right decision”, said United Arab Emirates Energy Minister Suhail Al-Mazrouei. There should not be an increase in crude inventories that could result in a collapse of prices, Mazrouei also said. The responsibility of the OPEC was not complete as yet and therefore there is little need for altering the agreement, he said.
While demand for Saudi crude had dropped in the United States, there has been an uptick in the demand for crude from Asia, Falih said. He claimed that the amount of crude being produced and exported by Iran is not known to any one and added that there was no record of “a lot” of Iranian oil.
(Adapted from SaudiGazette.com)