BCN-11,12 Saudi minister ‘very optimistic’ about oil market

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SAUDI-OIL-OPEC

Saudi minister ‘very optimistic’ about oil market

ABU DHABI, Jan 15, 2019 (BSS/AFP) – Saudi Energy Minister Khalid al-Falih
said on Tuesday he was “very optimistic” about the outlook for the oil market
after producers cut output to support flagging prices.

Members of the OPEC cartel and allies including Russia decided last month
to reduce output by 1.2 million barrels per day (bpd) after prices fell by
more than 40 percent in just a few weeks in late 2018.

The price of benchmark Brent crude, which briefly dipped below $50 a barrel
in November, rebounded partially to above $60 a barrel following the
production cuts which took effect on January 1.

The market has remained volatile with prices fluctuating sharply even after
OPEC kingpin Saudi Arabia announced last week it will gradually cut output by
800,000 bpd in January and a further 100,000 bpd next month.

“I am confident that the impact of the decision we took to cut output by
1.2 million bpd … will be very strong,” Falih told reporters on the
sidelines of the Abu Dhabi Sustainability Week conference.

“But there is always a lagtime between the (decision to) cut production and
the impact reaching the market,” he said.

Falih said he is confident that “within the next few weeks” the market
conditions will return to normal and confidence will be restored.

“I am very optimistic,” Falih said.

The Saudi minister also downplayed the impact of an expected global
economic slowdown on the oil market.

“I am not ruling out a cyclical recession. I think we all know that these
things are a fact of life,” especially after a long expansionary period,
Falih said.

“I just don’t see it as a major shock to the global economy. Certainly, I
don’t see a big spillover into the oil market,” he said.

Oil prices crashed in mid-2014 to below $30 a barrel, down from over $100 a
barrel, because of a glut in supplies and weakening world demand.

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That prompted the Organization of Petroleum Exporting Countries to cooperate
with non-OPEC producers, mainly Russia, to trim output by 1.8 million bpd
from the start of 2017.

After they abandoned the production cuts policy in mid-2018, oil prices
dropped again.

But Falih said that the so-called OPEC+ group, which pumps 52 million bpd
or 52 percent of global output, is capable of rebalancing the market which
has a surplus of around 300,000 to 400,000 bpd.

“An adjustment by a half percent does not appear to me to be a challenge,”
Falih said.

BSS/AFP/SR/2010 HRS