Saudi Arabia may extend oil output cuts beyond 2017

PanARMENIAN.Net - Saudi Arabia's energy minister Khalid Al-Falih said on Monday, May 8 that oil markets were rebalancing after years of oversupply, but that he still expected an OPEC-led deal to cut output during the first half of the year to be extended to all of 2017, Reuters reports.

The Organization of the Petroleum Exporting Countries (OPEC), of which Saudi Arabia is the de-facto leader, and other producers including Russia, pledged to cut output by 1.8 million barrels per day (bpd) during the first half of the year to prop up the market.

But global inventories remain high, pulling crude oil prices back below $50 per barrel and putting pressure on OPEC to extend the cuts to the rest of the year.

"Based on consultations that I've had with participating members, I am confident the agreement will be extended into the second half of the year and possibly beyond," said Falih, Saudi Minister of Energy, Industry and Mineral Resources, during an industry event in Kuala Lumpur.

Falih said recent price falls had been caused by the low demand season and refinery maintenance, as well as by non-OPEC production growth, especially in the United States.

U.S. oil production has gained more than 10 percent since mid-2016 to 9.3 million bpd, close to levels of top producers Russia and Saudi Arabia.

Despite this, Falih said that markets had improved from last year's lows, when crude prices fell below $30 per barrel.

"I believe the worst is now behind us with multiple leading indicators showing that supply-demand balances are in deficit and the market is moving towards rebalancing," he said.

"We should expect healthier markets going forward."

He also expected global oil demand to grow at a rate close to last year. In China, oil demand growth should match last year's due to a robust transport sector, while India should record healthy growth, he said.