VIENNA: Saudi Arabia expects the likely extension of a deal among 24 oil producers cutting production will ease the global crude glut sufficiently by early 2018, Riyadh’s energy minister said Thursday.
Oil prices fell in London however on the back of disappointment that he ruled out deeper cuts in production.
“All the simulations that have been done by OPEC and non-OPEC experts… demonstrated that we will be within the five-year average in the first quarter of next year,” Khalid al-Falih said.
Late last year, the 24 countries, including the OPEC cartel and Russia, agreed to cut production by 1.8 million barrels per day in order to reduce global oil inventories to the five-year average.
This has helped lift oil prices from $26 barrel in early 2016 to around $50 now, and the producers were expected to agree a nine-month extension at talks in Vienna on Thursday.
Falih told reporters at the start of the meeting at the headquarters of the Organization of the Petroleum Exporting Countries that this was “almost certain… to do the trick”.
However, higher oil prices have helped rival shale oil producers in the United States, which is outside the accord, to increase their output and slow down the reduction in inventories.
Falih said however that he was not worried.
“Shale is a important variable but we don’t believe it is going to significantly derail or affect what we are doing,” he said.
In London late morning, Brent Crude, the global benchmark, was down 38 cents at $53.58. West Texas Intermediate was off 46 cents at $50.90 per barrel.
Chris Beauchamp, market analyst at online trade IG, said that Falih’s belief that no more cuts are needed was “quaint”.
“This caused a swift dive in oil prices, unsurprisingly, but we can expect more of the same throughout the day,” Beauchamp said.