EMEA News
Khalid al-Falih: Oil Inventory Overhang "Will Take a Long Time" to Vanish
In seemingly marked contrast to his optimism of just a month ago, Khalid al-Falih, energy minister for Saudi Arabia, expressed concern this week about the global surplus of oil and said he hopes that slower economic growth will not impact demand.
He told German media that although the demand for oil is currently "healthy," "there are economic headwinds in some important markets and we hope this does not trigger a slowdown in global demand."
He went on to say that supply has decreased by 1 million barrels of crude per day due to the U.S. downsizing and production outages in Canada: "At the same time, demand has recovered, meaning that supply and demand are now more balanced again.
"But there are still excess stocks on the market - hundreds of millions of barrels of surplus oil. It will take a long time to reduce this inventory overhang."
While not much different in content compared to comments made in June, al-Falih's remarks seem far more cautious than when he told reporters that the global oil glut has vanished and that once much of the record volume of oil in storage is sold off, his kingdom can resume its traditional role managing supply and demand: "We are out of it, the oversupply has disappeared.
"We just have to carry the overhang of inventory for a while until the system works it out."
The energy minister also seemed fairly muted when discussing Saudi Arabia's bid to sell a piece of Saudi Arabian Oil Co., also known as Saudi Aramco: he pointed out that "The size and complexity of an initial public offering of Saudi Aramco will require a great deal of internal preparation.
"The actual IPO time frame will also be subject to a number of external factors, including equity market conditions, oil price outlook, and domestic capital market readiness."
He added that 2018 is a "reasonable" time frame to list the company, said to be worth as much as $3 trillion.
Geopolitical Futures in April listed Saudi Arabia as one of the 10 countries worst hit by the global export crisis, and analysts such as Matthew Weatherly-White, founder of the Caprock Group, believe the kingdom is fearful of oil's future - hence the Aramco initiative - or alternatively could be sitting on less oil than is commonly thought and trying to sell before the truth is discovered.
