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

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.


IMF warns of Asia’s darkening growth outlook as trade war bites

Updated 18 October 2019

IMF warns of Asia’s darkening growth outlook as trade war bites

  • The IMF cut its economic growth forecast for the Asia-Pacific region to 5.0 percent for this year and 5.1 percent for 2020
  • It also slashed China’s growth forecast to 6.1 percent for this year and 5.8 percent for 2020
WASHINGTON: Asian nations face heightening risks to their economic outlooks as the US-China trade war and slumping Chinese demand hurt the world’s fastest-growing region, the International Monetary Fund said on Friday.
In its World Economic Outlook report on Tuesday, the IMF cut its economic growth forecast for the Asia-Pacific region to 5.0 percent for this year and 5.1 percent for 2020 — the slowest pace of expansion since the global financial crisis more than a decade ago.
“Headwinds from global policy uncertainty and growth deceleration in major trading partners are taking a toll on manufacturing, investment, trade, and growth,” Changyong Rhee, director of the IMF’s Asia and Pacific department, said during a news conference at the IMF and World Bank fall meetings.
“Risks are skewed to the downside,” he said, calling on policymakers in the region to focus on near-term fiscal and monetary policy steps to spur growth.
“The intensification in trade tensions between the US and China could further weigh on confidence and financial markets, thereby weakening trade, investment and growth,” he said.
A faster-than-expected slowdown in China’s economic growth could also generate negative spillovers in the region, as many Asian countries have supply chains closely tied to China, he added.
The IMF slashed China’s growth forecast to 6.1 percent for this year and 5.8 percent for 2020, pointing to the impact from the trade conflict and tighter regulation to address excess debt.