Suhail Al Mazroui, UAE’s Energy Minister was recently quoted as saying that the global oil market output is still on the process of reaching equilibrium as the Organization of Petroleum Exporting Countries (OPEC) is targeting the right level of inventories for the good stability of the market.
Suhail Al Mazroui, who is also the current president of OPEC, further told reporters on the sidelines of the Middle East Petroleum and Gas Conference in Abu Dhabi recently that the market is still in the process of being balanced, but the question remains as to what the right levels of inventories were. He said the market still needs enough time and the job is not completed yet.
Suhail Al Mazroui also added that the Joint Ministerial Monitoring Committee of OPEC that recently met in Jeddah Saudi Arabia was unanimous in agreement that some technical work still remain to be done to reach a fair level of inventories for the long run.
According to Al Mazroui, the conclusion from the meeting in Jeddah is that they need to target fair and long lasting inventory levels. However, the committee has charted technical teams of experts to work and report back to them on the correct inventories for the market’s stability.
OPEC and non-OPEC member countries are cutting production by about 1.8 million barrels a day to help lower global oil inventories and help prop up oil prices. The agreement which started early last year will also continue till the end of 2018.
Al Mazroui also disclosed that the joint ministerial monitoring committee had concluded that there is very good conformity with the agreement from both OPEC and non-OPEC member states while noting his surprise that oil producers stuck to the agreement even after oil prices went north of $60 (Dh220). This, Al Mazroui observed, is a serious indication from oil producers that they are committed to what they are doing.
The chairman of FGE consultancy, Dr. Fereidun Fesharaki, while speaking at the conference said the oil market is in a good shape and could also be overheating. He said that the demand for oil is very strong and the risks are on the upside. Fesharaki observed that the policies of Donald Trump, the president of the US on Iran and Venezuela are likely to increase the prices of oil unless OPEC relaxes production cuts.
At the time of publication, the global benchmark for oil, namely Brent is currently trading at around $77 per barrel and West Texas intermediate at $63 for each barrel.