Saudi energy minister recommends driving down oil inventories, says supply plentiful

Sun, 2019-05-19 20:29

JEDDAH: Saudi Arabia’s Energy Minister Khalid Al-Falih said on
Sunday he recommended “gently” driving oil inventories down at
a time of plentiful global supplies and that OPEC would not make
hasty decisions about output ahead of a June meeting.
“Overall, the market is in a delicate situation,” Falih told
reporters before a ministerial panel meeting of top OPEC and
non-OPEC oil producers, including Saudi Arabia and Russia.
While there is concern about supply disruptions, inventories are
rising and the market should see a “comfortable supply situation
in the weeks and months to come,” he said.
The Organization of the Petroleum Exporting Countries, of which
Saudi Arabia is de facto leader, would have more data at its next
meeting in late June to help it reach the best decision on output,
Falih said.
“It is critical that we don’t make hasty decisions – given
the conflicting data, the complexity involved, and the evolving
situation,” he said, describing the outlook as “quite foggy”
due in part to a trade dispute between the United States and
“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.
OPEC, Russia and other non-OPEC producers, an alliance known as
OPEC+, agreed to reduce output by 1.2 million barrels per day (bpd)
from Jan. 1 for six months, a deal designed to stop inventories
building up and weakening prices.
Russian Energy Minister Alexander Novak told reporters that
different options were available for the output deal, including a
rise in production in the second half of the year.
The energy minister of the United Arab Emirates, Suhail
Al-Mazrouei, said oil producers were capable of filling any gap in
the oil market and that relaxing supply cuts was not “the right
Mazrouei said the UAE did not want to see a rise in inventories
that could lead to a price collapse and that OPEC would act wisely
to maintain sustainable market balance.
“As UAE we see that the job is not done yet, there is still a
period of time to look at the supply and demand and we don’t see
any need to alter the agreement in the meantime,” he said.
US crude inventories rose unexpectedly last week to their highest
since September 2017, while gasoline stockpiles decreased more than
forecast, data from the government’s Energy Information
Administration showed on Wednesday.
Saudi Arabia sees no need to boost production quickly now, with oil
at around $70 a barrel, as it fears a price crash and a build-up in
inventories, OPEC sources said, adding that Russia wants to
increase supply after June.
The United States, not a member of OPEC+ but a close ally of
Riyadh, wants the group to boost output to bring oil prices
Falih has to find a delicate balance between keeping the oil market
well supplied and prices high enough for Riyadh’s budget needs,
while pleasing Moscow to ensure Russia remains in the OPEC+ pact,
and being responsive to the concerns of the United States and the
rest of OPEC+, the sources said earlier.
Sunday’s meeting of the ministerial panel, known as the JMMC,
comes amid concerns of a tight market. Iran’s oil exports are
likely to drop further in May and shipments from Venezuela could
fall again in coming weeks due to US sanctions.
Oil contamination also forced Russia to halt flows along the
Druzhba pipeline — a key conduit for crude into Eastern Europe
and Germany — in April. The suspension, as yet of unclear
duration, left refiners scrambling to find supplies.
Russia’s Novak told reporters that oil supplies to Poland via the
pipeline would start on Monday.
OPEC’s agreed share of the cuts is 800,000 bpd, but its actual
reduction is far larger due to the production losses in Iran and
Venezuela. Both are under US sanctions and exempt from the
voluntary reductions under the OPEC-led deal.
Oil prices edged lower on Friday due to demand fears amid a
standoff in Sino-US trade talks, but both benchmarks ended the week
higher on rising concerns over disruptions in Middle East shipments
due to US-Iran political tensions.
Tensions between Saudi Arabia and Iran are running high after last
week’s attacks on two Saudi oil tankers off the UAE coast and
another on Saudi oil facilities inside the Kingdom.
Riyadh accused Tehran of ordering the drone strikes on oil pumping
stations, for which Yemen’s Iran-aligned Houthi militia claimed
Saudi Arabia’s minister of state for foreign affairs said on
Sunday that the Kingdom wants to avert war in the region but stands
ready to respond with “all strength” following the attacks.
“Although it has not affected our supplies, such acts of
terrorism are deplorable,” Falih said. “They threaten
uninterrupted supplies of energy to the world and put a global
economy that is already facing headwinds at further risk.”
The attacks come as the United States and Iran spar over
Washington’s tightening of sanctions aimed at cutting Iranian oil
exports to zero, and an increased US military presence in the Gulf
over perceived Iranian threats to US interests.

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Source: FS – All-News-Economy
Saudi energy minister recommends driving down oil inventories, says supply plentiful