OPEC and its allies have much work to do to balance global oil markets and are prepared to do what’s necessary in the second half, Saudi Energy Minister Khalid Al-Falih said.
The 24-nation coalition known as OPEC+ needs to “stay the course” until June as its job is nowhere near complete in terms of restoring oil-market fundamentals, Al-Falih said late Sunday at a news conference in Baku, Azerbaijan. U.S. inventories remain significantly above normal levels, and there is a risk of oversupply in the short term, he said.
At the same time, many investors feel great anxiety about investing in oil exploration and production due to uncertainty, and OPEC+ doesn’t want a situation where crude prices are too high, Al-Falih said. Producers are conforming well with output cuts they agreed to make starting in January, and their compliance is improving and will easily exceed 100 percent in March, he said. Saudi output up until April will be below the kingdom’s target.
Al-Falih spoke ahead of a planned meeting in Baku on Monday of a committee of OPEC+ members responsible for monitoring output. The Organization of Petroleum Exporting Countries and its allies have entered its third year of curbing supply in order to defend crude prices. While they’ve helped engineer a 25 percent recovery in Brent this year, current prices of about $67 a barrel remain well below the levels that most of the producers need to cover government spending.
Russia, Saudi Arabia’s main partner in leading the market-balancing effort, plans to achieve its promised cuts in output by the end of March or early April, Russian Energy Minister Alexander Novak said at the same conference. Russia needs time to make its promised cuts due to harsh weather, Novak said.