The oil market has started showing signs that it is headed in the right direction, and current expectations point to the market returning to balance in the fourth quarter this year, Saudi Oil Minister Khalid al-Falih told London-based Arab daily Asharq al-Awsat in an interview published on Monday.
“In my opinion, market fundamentals are going in the right direction, but in light of the large surplus in stockpiles over the past years, the cut needs time to take effect,” al-Falih.
“Current expectations indicate the market to rebalance in the fourth quarter of this year taking into account an increase in shale oil production,” the minister noted.
Asked to comment on the recent oil price drops, al-Falih told Asharq al-Awsat:
“It was not our goal when launching this initiative in Algeria to reach a specific price. Prices are determined by markets driven by many variables beyond the control of producing countries and unpredictable.”
But the minister went on to add:
“It is worth distinguishing between these fluctuations and the long-term market fundamentals, which we are trying to influence by controlling production.”
Referring to the global glut, the Saudi minister told the newspaper that there was a relatively big draw of around 50 million barrels from floating storage facilities and a drop in OECD onshore storage of 65 million barrels compared to July last year.
“The market often tends to ignore these criteria and focus on the drop in US inventories that came below expectations,” al-Falih said. Related: Solar And Wind Revolution Happening Much Faster Than Expected
As regards exempt Libya and Nigeria—which contributed the most to OPEC’s total production increase in May over April—the Saudi minister said that the two countries’ output levels are within the range that OPEC had set when it forged the deal last year.
“They shouldn’t be considered a threat to the initiative,” al-Falih noted.
Earlier this month, both Saudi Arabia and Russia continued to claim that the OPEC deal was working fine, with al-Falih saying that the decline in global inventories that had already started would speed up in the next three to four months.
By Tsvetana Paraskova for Oilprice.com
More Top Reads From Oilprice.com:
- How A $200,000 Well Could Drastically Change The Oil Industry
- Big Oil Opposes Trump’s Budget Plans
- Yemen War Threatens Crucial Oil Chokepoint