Saudi’s Falih says he sees no oil shortage, but OPEC to act if needed

Saudi Arabia's Energy Minister Khalid al-Falih attended a ministerial panel gathering on Sunday of top OPEC and non-OPEC producers in Jeddah. (File/AFP)
Updated 18 May 2019
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Saudi’s Falih says he sees no oil shortage, but OPEC to act if needed

  • Falih said OPEC will not decide on output until late June when the group is due to meet next
  • OPEC, Russia and other non-OPEC producers agreed to reduce output by 1.2 million barrels per day (bpd) from Jan. 1 for six months

JEDDAH: Saudi Arabia's Energy Minister Khalid al-Falih said on Saturday that he saw no oil supply shortage as global oil inventories are still rising, particularly from the United States, but OPEC will be responsive to the oil market's needs.

Speaking in Jeddah ahead of a ministerial panel gathering on Sunday of top OPEC and non-OPEC producers, including Saudi Arabia and Russia, Falih told Reuters OPEC will not decide on output until late June when the group is due to meet next.

"I am not sure there is a supply shortage, but we will look at the (market) analysis. We will definitely be responsive and the market will be supplied," Falih said, when asked whether an increase in output was on the table due to oil shortage concerns.

"But all indications are that inventories are still rising. We saw the data from the U.S. week after week, and they are massive increases, so there is obviously supply abundance."

The Organization of the Petroleum Exporting Countries (OPEC), Russia and other non-OPEC producers, known as OPEC+, agreed to reduce output by 1.2 million barrels per day (bpd) from Jan. 1 for six months, a deal designed to stop inventories building up and weakening prices.

"We will be flexible. We are going to do the right thing as we always do," Falih said of any decision at the meeting in June on continuing the reductions.

Falih said OPEC was guided by two main principles: "One to keep the market in its direction towards balancing, and inventories (are) back to normal level. And two to be responsive to market needs. We will strike the right balance I am sure."

Saudi Arabia does not see a need to quickly boost production now with oil prices around the $70 a barrel level, as it fears a crash in prices and a build-up in inventories, OPEC sources said. But Russia wants to increase supply after June when the current OPEC+ pact is due to expire, the sources said.

The United States on the other hand, which is not a member of the OPEC+ but is a close ally of Saudi Arabia, wants the group to boost output to bring oil prices down.

Falih has to find a delicate balance between keeping the oil market well supplied and prices high enough for Riyadh's budget needs, while pleasing Moscow to ensure Russia remains in the OPEC+ pact, and being responsive to the concerns of the United States and the rest of the OPEC+, the sources said.

OPEC's agreed share of the cuts is 800,000 bpd, but its actual reduction is far larger due to the production losses in Iran and Venezuela. Both are under US sanctions and exempt from the voluntary reductions under the OPEC-led deal.

US President Donald Trump has called on OPEC and the group's de facto leader Saudi Arabia to lower oil prices.

Sunday's ministerial panel meeting, known as the JMMC, comes amid concerns of a tight market as Iran's oil exports are likely to drop further in May, and shipments from Venezuela could fall more in coming weeks due to the sanctions by Washington.

Oil contamination also forced Russia to halt flows along the Druzhba pipeline - a key conduit for crude into Eastern Europe and Germany - in April. The suspension, as yet of unclear duration, left refiners scrambling to find supplies.

But US crude inventories rose unexpectedly last week to their highest since September 2017, while gasoline stockpiles decreased more than forecast, the Energy Information Administration (EIA) said on Wednesday.

Tensions between Saudi Arabia and fellow OPEC member Iran are also running high, after last week's attacks on two Saudi oil tankers off the coast of the United Arab Emirates and another on Saudi oil facilities inside the kingdom.

Saudi Arabia accused Iran of ordering the attack on state oil giant Saudi Aramco's oil pumping stations that Yemen's Iran-aligned Houthi militia has claimed responsibility for.

An OPEC and non-OPEC technical committee found that oil producers' compliance with the supply-reduction agreement reached 168 percent in April, three sources told Reuters on Saturday.

That shows that OPEC+ producers are cutting output by more than their share. Saudi Arabia has been pumping below its production target since January to keep oil inventories and prices in check.


Lebanon’s Hariri calls for cabinet solidarity in budget debate

Updated 18 June 2019
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Lebanon’s Hariri calls for cabinet solidarity in budget debate

  • The PM said cabinet ministers need to be united and responsible
  • Lebanon’s debt is almost 150% of its GDP

BEIRUT, June 18 : Lebanon Prime Minister Saad Al-Hariri on Tuesday called for parliament to quickly approve the country’s 2019 budget and urged his coalition government to avoid internal disputes.
The cabinet this month agreed a budget plan that shrinks the projected fiscal deficit by 4 percentage points from last year to 7.6% by cutting spending and raising taxes and other fees.
“What I want during the debate is for us to be responsible and united, and not contradictory,” Hariri said in a statement, addressing cabinet ministers as to their comportment during the parliament debate.
Parliament’s finance committee is debating the draft budget and has suggested amendments, local newspapers reported. It will then put the budget to the full assembly to ratify it.
Parliament is mostly composed of parties that are also present in the coalition government and which supported the budget there.
Since the budget was agreed there have been fierce arguments between parties in the coalition over several subjects, though these have not targeted the budget.
Lebanon has one of the world’s heaviest debt burdens, equivalent to about 150% of GDP, and the International Monetary Fund has urged it to cut spending.
“We have held 19 cabinet meetings to agree on this draft budget and these sessions were not for fun, but for deep, detailed debate over every clause and every idea,” Hariri said.
“For this reason, I consider it the responsibility of each of us in government to have ministerial solidarity...to defend in parliament the decision that we have taken together,” he added.
After the 2019 budget is agreed, the cabinet must quickly start working on the 2020 budget and on approving the first phase of a program of investments toward which foreign donors have offered $11 billion in project financing. (Reporting by Angus McDowall, editing by Ed Osmond)