JEDDAH, Saudi Arabia (Reuters) – Saudi Energy Minister Khalid al-Falih said on Sunday that he recommended "cutting back" oil stocks at a time of abundant global supply and demand. that OPEC would not take hasty decisions on production before the June meeting.
Saudi Energy Minister Khalid al-Falih, addressing the media before the 14th Joint Ministerial Monitoring Committee meeting in Jeddah, Saudi Arabia, May 19, 2019. REUTERS / Waleed Ali
"Overall, the market is in a delicate situation," Falih told reporters before a ministerial round table gathering OPEC's major oil producers and non-member countries, including Saudi Arabia and Saudi Arabia. Russia.
Although supply disruptions are causing concern, inventories are rising and the market is expected to experience a "comfortable supply situation in the weeks and months to come," he said.
The Organization of Petroleum Exporting Countries, of which Saudi Arabia is the de facto leader, will have more data at its next meeting at the end of June to help it make the best production decision. Falih.
"It is essential not to make hasty decisions because of conflicting data, complexity and changing circumstances," he said, describing the situation as "somewhat vague", party because of a trade dispute between the United States. and China.
"But I want to assure you that our group has always taken the right steps in the interests of consumers and producers; and we will continue to do so, "he added.
The OPEC, Russia and other non-OPEC producers, an alliance known as OPEC +, have agreed to cut production by 1.2 million barrels per day from 1 January for a period of six months, in order to put an end to stock build-up and lower prices.
The ministerial panel will not recommend a policy of production policy on Sunday, but will emphasize the need to monitor the market until June, said a familiar source of the discussions.
Russian Energy Minister Alexander Novak said various options were available for the production agreement, including an increase in production in the second half of the year.
Saudi Arabia and Russia discuss two main scenarios for the June meeting that propose higher production from the second half of this year, two other sources said.
One scenario was to eliminate the over-compliance of the agreed reductions, which would increase production by about 0.8 million barrels per day, while the other option would be to reduce the reductions agreed to at 0.9 million barrels a day.
UAE Energy Minister Suhail al-Mazrouei told reporters that producers were able to fill any gaps in the market and that reducing supply cuts was not enough. 39, was not "the right decision".
Mazrouei said the UAE did not want to see an increase in stocks that could lead to price collapse and that OPEC would act wisely to maintain a sustainable market equilibrium.
"As the United Arab Emirates, we see that the work is not over yet, there is still some time to examine the supply and demand and we do not see the need to change the agreement meanwhile, "he said.
US crude inventories rose unexpectedly last week to their highest level since September 2017, while gasoline inventories fell more than expected, according to data from the Energy Information Administration.
Saudi Arabia does not see the need to boost production quickly, with a barrel of oil at around $ 70 a barrel, fearing a stock market crash and an increase in stocks, OPEC sources said. The United States, which is not a member of OPEC + but a close ally of Riyadh, wants the group to increase production in order to lower oil prices.
Falih must strike a delicate balance between maintaining the well-supplied oil market and prices high enough to meet Riyadh's budget needs, while allowing Moscow to keep Russia in the OPE + pact and address the concerns. from the United States and the rest of the OPEC + countries. , the sources said.
The ministerial group meeting, known as JMMC, comes amid the concerns of a tense market. Iran's oil exports are expected to decline further in May, and shipments from Venezuela may decline further in the coming weeks as a result of the sanctions imposed by the United States.
Contamination with oil has forced Russia to interrupt flows along the Druzhba pipeline – a key source of crude oil in Eastern Europe and Germany – leaving refiners looking for supplies.
Russia's Novak told reporters that deliveries to Poland via the pipeline would start on Monday.
The agreed share of OPEC in the cuts is 800,000 barrels a day, but its actual reduction is much larger because of production losses in Iran and Venezuela. Both are subject to US sanctions and are excluded from voluntary reductions resulting from the agreement with OPEC.
Oil prices edged down on Friday due to fears over demand following a deadlock in Sino-US trade talks.
Tensions between Saudi Arabia and Iran are exacerbated by last week's attacks on two Saudi oil companies off the United Arab Emirates and another against Saudi oil facilities inside the kingdom.
Riyadh accused Tehran of ordering drone strikes on oil pumping stations, whose Iran-aligned Houthi group and Yemen have claimed responsibility. The UAE has not accused anyone of sabotaging tankers. Iran has moved away from both sets of attacks.
"Although this has not affected our stocks, such acts of terrorism are deplorable," Falih said. "They threaten the uninterrupted supply of energy in the world and are endangering a global economy already facing headwinds."
The attacks come as the United States and Iran vie for tougher Washington sanctions to reduce Iran's oil exports to zero, and a heightened US military presence in the Gulf in the face of perceived threats from the United States. Iran against their interests.
Other reports by Dahlia Nehme and Stephen Kalin; Written by Ghaida Ghantous; Edited by Dale Hudson