DUBAI: Global oil markets are “on the path to rebalancing” as OPEC+, the alliance led by Saudi Arabia and Russia, sticks by its tough new regime to limit crude production, Saudi Energy Minister Prince Abdul Aziz bin Salman said on Wednesday.
The minister said the improved outlook was due to increased demand as pandemic-hit economies re-open, but also because of what he called “the three Cs — cuts, compliance and compensation.”
“The world now recognizes that OPEC+ has been instrumental in bringing stability to oil markets, the energy industry and the global economy,” he said at the monthly virtual meeting of energy ministers to monitor world oil markets. Some energy experts have predicted oil demand will be at 97 per cent of pre-pandemic levels this year.
OPEC+ oil producers had achieved “unprecedented” levels of compliance with the historic cuts in April, with average compliance reaching 97 per cent and some members — notably Iraq and Nigeria — hitting record levels.
Both countries have also agreed to compensate OPEC+ for past over-production to help eliminate the oil surplus, but Prince Abdul Aziz hinted that the compensation deal would be phased out as markets approached rebalance.
“We should endeavor to put this temporary compensation regime behind us, by clearing all the past over-production by end of September,” he said.
The meeting closed with the level of cuts, 7.7 million barrels per day, unchanged. In private session, delegatesstressed the need to comply 100 per cent with agreed cuts.
Prince Abdul Aziz said there were encouraging signs of rebalancing between oil supply and demand in the draw-down of global oil inventories, the reduction in “floating storage” in tankers, and a recovery in demand for gasoline and diesel in many countries, including Saudi Arabia.
He warned, however, that “the jury is still out” on how fast and uniform the global economic recovery would be because of the ongoing threat from COVID-19.
Oil prices took some heart from the OPEC+ gathering. Brent crude, the global benchmark, traded at $45.95, more than 2 per cent up.