EMEA News
Al-Falih Predicts Market Balance and Extended Oil Cuts for 2019
Even though the Organization of the Petroleum Exporting Countries' (OPEC) long history of in-fighting have caused analysts to be skeptical about the efficacy of its latest round of output cuts, the prognostications of the cartel's de facto leader, Saudi Arabia, are somewhat more seriously considered - and if its energy minister is to be believed, 2019 will prove to be considerably healthier than many experts think.
Khalid Al-Falih told reporters in a press scrum on Wednesday that he expects global oil stocks to fall by the end of the first quarter: "We remain focused on fundamentals; and on fundamentals I can tell you with a high degree of confidence that we will achieve balance between supply and demand in 2019 - make no mistake about it, we're united within the kingdom and we're united with our partners within OPEC and outside OPEC."
Falih added that OPEC and non-OPEC members, including Russia, are committed to reducing stocks under the December Vienna agreement, and that supplies have already started to fall in the last few weeks.
He also shared with Bloomberg television his opinion on why the crude market incurred such spectacular losses in the last quarter of 2018: "What has happened in my opinion recently is a confluence of many non-fundamental oil issues, including the geopolitical issues, especially around the [Iran] sanctions and the wavers that were granted by the United States."
The energy minister also appeared confident that OPEC+ will extend its oil cuts next year: "We will meet in April and I'm certain that we will extend it," he said, adding, "We need more time to achieve the result."
Not everyone shares Al-Falih's confidence: Derek Brower, a director at consultant RS Energy Group, remarked, "The market's judgment on the most recent cuts deal, even before it starts, is now pretty clear: it was too vague, lacked some credibility, and the April review date suggested it might be too short.
"So it makes sense that producers are already fretting; but it is also pretty early to be saying what OPEC will do in April - lots can change by then."
Al-Falih seemed to be extending the optimism expressed in his kingdom's new budget, in which it was predicted that oil will average about $80 per barrel in 2019, as long as its production continues at 10.2 million barrels per day and Saudi Aramco won't increase its allocations to the government.
