Oil market ‘will balance itself but patience needed’

FUJAIRAH: Kuwait’s OPEC governor Nawal Al-Fuzaia said that the oil market would balance itself but “we need to be patient,” indicating support for the producer group’s policy of defending market share despite falling prices.
Speaking at the Gulf Intelligence Energy Markets Forum in the UAE emirate of Fujairah, Fuzaia said the current imbalance in the market stemmed from several factors and not just an economic slowdown in China.
“The weakening demand in China is a short-term issue. I don’t think that it will have an effect on OPEC market share,” she said.
OPEC shifted policy in November 2014 by deciding not to support prices by cutting output, in order to defend market share against US shale oil and other higher-cost supply sources.
The shift has proved controversial within OPEC as oil prices have more than halved from above $100 in June 2014, hurting the economies of less wealthy members such as Venezuela.
Still, Fuzaia said the Organization of the Petroleum Exporting Countries needed more transparency in data from China to gauge demand.
Fuzaia said OPEC was looking for stable, sustainable growth in China’s economy and demand but that should Chinese demand decline, Kuwaiti crude would go to other markets.
OPEC delegates have earlier said that the group’s new medium-term forecasts point to higher demand for the group’s oil, a sign that its strategy of letting prices fall is discouraging supplies from competing producers.
The forecasts, to be published in OPEC’s World Oil Outlook later this year, were expected to be discussed during a meeting of OPEC’s national representatives in Vienna.
“The new medium-term numbers show a higher demand for OPEC crude,” said one OPEC delegate, who added that oil prices are assumed to be lower than previously. “There is an impact on higher-cost producers.”
OPEC’s 2014 World Oil Outlook expected demand for its oil to fall to 28.50 million barrels per day (bpd) in 2016 from 30 million bpd in 2014 and assumed oil prices at around $110 a barrel to 2020 — more than double the current level.
The exact 2015 figures could still be revised following feedback from the national representatives, who are technical experts and do not set the Organization of the Petroleum Exporting Countries’ output policy.
OPEC’s new outlook is being prepared after the group’s historic policy shift of November 2014 to not support prices by cutting output, in order to defend market share against US shale oil and other higher-cost supply sources.
Venezuela has been calling for output cuts to prop up prices and President Nicolas Maduro said this week he would travel shortly to seek support for his push for a summit between OPEC and non-OPEC producers.
But the new higher demand forecasts would appear to support the view of the Gulf members that a period of lower prices would curb competing supplies, leading to an extra need for OPEC crude in the longer term.
OPEC’s next ministerial meeting to decide policy is on Dec. 4 in Vienna.