Although the oil market is taking longer than anticipated to return to balance, the oversupply should be cleared by the time OPEC’s cuts expire at the end of March next year, and the cartel does not need to further cut output for the time being, Kuwait’s Oil Minister Essam al-Marzouq told Reuters in an interview published on Tuesday.
“We are in the first two weeks of the extension period. It is too early to say now what I will do in November,” al-Marzouq told Reuters, but added that there was no need for OPEC to convene a special extraordinary gathering before its usual meeting in November.
The cartel has to “wait and see what happens, at least in the next couple of weeks until the end of July, to see the compliance data and the effect on the stocks,” al-Marzouq said.
The Kuwaiti minister was reiterating what industry bodies and other OPEC oil officials have been saying for weeks – that the market would take longer to rebalance than initially expected, and that no deeper cuts are needed or on the table.
Last week, the International Energy Agency (IEA) said in its Oil Market Report that “we need to wait a little longer to confirm if the process of re-balancing has actually started in 2Q17.” OECD industry stocks fell in May by 6 million barrels, but stocks were still 266 million barrels above the five-year average, down from 300 million barrels in April, the IEA said. Preliminary data show a moderate reduction in OECD stocks for June, the agency noted. Related: 4 Reasons Oil Will Rally Back To $50
Al-Marzouq told Reuters today that “We have always been looking at the second half of the year,” for the stocks to draw down, thanks to higher demand during the U.S. summer driving season.
But as early as in January, Al-Marzouq was proclaiming victory for the cartel: “We are confident that rebalancing in the oil markets has already started. “We expect a positive impact on the market by the end of the first quarter of 2017,” Al-Marzouq said at a Petroleum Intelligence Conference.
The EIA reported last week a strong decline in inventories of 7.6 million barrels for the week to July 7, following a 6.3-million-barrel draw the previous week.
Referring to increased talk of possibly capping rising Nigerian and Libyan oil production, Kuwait’s al-Marzouq told Reuters:
“It is too early for that.”
Oil prices had started to stabilize at US$45-50, which is “what markets see now as a fair price”, according to the minister, who doesn’t rule out higher crude prices as inventories drop in the next few months.
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By Tsvetana Paraskova for Oilprice.com
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