Oil markets improving: Saudi energy minister

Saudi Energy Minister Khalid al-Falih said while oil markets are improving as a result of the OPEC supply cut deal, it is too early to consider continuing the agreement into the second half of 2017. CNBC photo.

Oil markets improve due to compliance with OPEC deal

On Tuesday, Saudi Arabia’s Energy Minister Khalid al-Falih said fundamentals of oil markets were improving thanks to the OPEC supply cut deal hammered out late last year.

However, while speaking at the CERAWeek industry conference in Houston, Falih told energy executives and oil officials that worldwide oil inventories had fallen “slower than I thought”.

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Inventories in developed countries stand at about 300 million barrels more than the historic average, said Falih.

As part of the OPEC supply cut deal, a number of OPEC member and non OPEC countries have cut production by about 1.8 million barrels per day from Jan. 1. Saudi Arabia has cut more than agreed to, bringing the kingdom’s crude output to below 10 million b/d.

Despite successfully cutting into the global oil supply, Falih agreed with oil ministers from other OPEC members and Russia who said it was too early to consider continuing with the cuts into the second half of the year.

“There is also cause for cautious optimism as we see the ‘green shoots’ of the recovery,” Falih said, but “We should not get ahead of the market.”

Cautioning shale producers, Falih warned that their increasing supply could discourage investment in multi-year, long-term projects from other oil sources.

Falih also said predictions made earlier this week that the world would soon reach peak demand were “misguided”, telling CNBC that the market could absorb between 3 million and 5 million barrels of new oil over time because of improving demand.

According to Saudi Arabia’s oil minister, the kingdom does not want OPEC to intervene in the oil market to address long-term structural shifts, but instead to address “short-term aberrations.”