Saudi Arabia said on Friday that OPEC and its allies should extend oil production cuts at around current levels as the kingdom did not want a fight for market share with the United States or a repeat of the price collapse five years ago.
Saudi Energy Minister Khalid al-Falih also said OPEC was close to agreeing to extend a pact on cutting oil supplies beyond June, although more talks were still needed with non-OPEC countries that were part of the production deal.
The Organization of the Petroleum Exporting Countries plus Russia and other producers, an alliance known as OPEC+, have a deal to cut output by 1.2 million barrels per day (bpd) from Jan. 1. The pact ends this month and the group meets in coming weeks to decide their next move.
“On the OPEC side, a rollover is almost in the bag. The question is to calibrate with non-OPEC,” Falih said at an economic forum in the Russian city of St Petersburg. “I don’t think there will be a need to deepen the cut.”
“I’m hoping it will be an easy decision and that we’ll roll over, but if it’s not, we will be flexible in terms of our position in the kingdom,” he said.
Oil prices are up 16 per cent so far this year thanks in part to the OPEC+ deal. But they have fallen from a peak above $75 in April to below $62 a barrel on concerns about demand due to a U.S.-China trade dispute and slowing economic growth.
Falih said the last three weeks, when there was a particularly sharp drop, had not been good, adding that a price below $60 would not offer oil firms enough confidence to invest.
Saudi Arabia has cut supply by more than required by the OPEC+ deal in a bid to stop inventories building up.
Falih said the kingdom was pumping 700,000 bpd below its 10.311 million bpd target, implying output of about 9.60 million bpd. “We of course want to drive inventories down,” he said.
In earlier comments, the minister had said he was unwilling to engage in a race to boost oil output to compensate for lower prices, saying a return to the situation that led to the price crash of 2014-2015 would be unacceptable.
Falih said the oil market was still not completely stable and said prices were being influenced by factors outside OPEC’s control, even though the market showed some encouraging signs.
“I think demand is rather healthy,” he said. “I think sentiment is shaky because of trade issues. Physical demand is very good. We’re not seeing any decline. I don’t think there will be a trade war,” the minister said.