Saudi Arabia's Oil Minister, Khalid Al-Falid, said the oil market is rebounding on the strength of an OPEC production cut but warned the kingdom won't stand for "free riders" boosting output at its expense.
"There is cause for cautious optimism as we see the green shoots of the recovery, driven by a better outlook on fundamentals coupled with the historic production agreement of three months ago," the Minister told the annual CERAWeek energy conference Tuesday.
Saudi Arabia led the agreement between the Organization of Petroleum Exporting Countries and leading non-OPEC producers such as Russia to reduce production by 1.8 million barrels per day, a target the Minister said it currently being met.
Saudi Arabia itself has reduced its daily output below 10 million barrels per day, despite having capacity to produce more than 12 million b/d. In the past, Saudi Arabia has slashed production during times of glut only to see non-OPEC competitors reap the benefits.
"But this time around, we made it clear that we will not bear the burden of free rides," Mr. Al-Falid said.
The agreement between OPEC and non-OPEC countries will be reviewed in May to decide whether it will be continued past June and should serve as a template for future market management by major producers, he said.
On Monday, oil ministers from fellow OPEC member Iraq and non-OPEC Russia also said it was too early to discuss extending the deal, while the head of Angola's state oil firm said she thought curbs should continue.
OPEC Secretary-General Mohammad Sanusi Barkindo said ministers want to see a substantial decline in global crude stocks before deciding whether to extend the production-cut agreement.
Both OPEC and the Paris-based International Energy Agency (IEA) that represents consuming countries agreed that global crude demand will continue to grow over the longer term, despite some analysts who suggest oil consumption could peak by 2030 due to the growing popularity of electric vehicles.
"There is no peak in oil demand that we see," IEA's Fatih Birol said. "Maybe growth will slow down but we don't see any peak."
A third of the growth in crude demand will come from Asian truck traffic alone, he said. After the session, Mr. Birol acknowledged that forecast of strong demand growth is based on a business-as-usual outlook, while crude consumption will have to start to decline by 2030 if the world is going to limit the increase in average global temperatures to 2-degrees C above pre-industrial levels.
The Saudi Minister echoed concerns raised Monday by the IEA that the global industry is not investing sufficiently to meet rising demand over the next few years. While production will grow in the United States, Canada and Brazil in the next three years, that will only offset declines being seen in China, the North Sea and Mexico, he said.
He rejected warnings that global crude demand will peak in the next 15 years. Despite concerns about climate change and action to reduce oil consumption, global economic and population growth will ensure demand will increase.
"I am concerned that misguided projections of peak demand and stranded petroleum resources may discourage the trillions of dollars in investments needed to underpin essential oil and gas supplies during the long transformation of our global energy system," he said.
Mr. Birol agreed, saying oil companies around the world need to boost spending to avoid price shocks early in the next decade.
"Our message to the oil industry gathered here in Houston is: Invest, invest, invest," he said.