The world will still have a surplus of oil by end-March next year, Saudi Arabia’s energy minister said on Thursday, signalling 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.
“We need to recognise 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 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 favours 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.”
Source: Reuters
