Monday, Khalid Al-Falih, Saudi Arabia’s energy minister said that oil markets were balancing after years of oversupply; and 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. OPEC or the Organization of the Petroleum Exporting Countries, of which Saudi Arabia as well as other producers including Russia, pledged to cut output by almost 1.8 million barrels per day during the first half of the year to prop up the market.
However, constant high supplies have resulted in crude oil prices falling back to an amount below $50 per barrel. In relevance to this event, this has put pressure on OPEC to extend to cut cover all of 2017.
Al-Falih said that recent price falls, had been caused by the low demand season and refinery maintenance, as well as production growth outside OPEC, especially the United States. During an industry event in Kuala Lumpur on Monday, Al-Fhali commented: “Based on consultations that I’ve had with the participating members, I am confident the agreement will be extended into the second half of the year.” He said.
In accordance to this event, United States oil production has risen more than 10% since mid-2016 to 9.3 million barrels per day, close to levels of top producers: Russia and OPEC’s de-facto leader: Saudi Arabia. Despite this, Al-Fhali remarked that markets had improved from last year’s lows, when crude prices fell below $30 per barrel.
He also expected global oil demand to grow at a rate close to last year. This is with China’s oil demand growth that is posing to match last year’s, on the back of a robust transport sector, Al-Fhali added.