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Oil prices have almost halved in the last year on oversupply in a drop that deepened after the Organization of the Petroleum Exporting Countries in 2014 changed strategy to protect market share against higher-cost producers, rather than cut output to prop up prices as it had done in the past. “There is an improvement in the market,” Abdullah al-Badri told reporters on the sidelines of an industry conference in London on Tuesday. “This situation may not stay long, more than two years,” he said in response to a question on how long the market would take to rebalance.
OPEC meets to review its output policy on Dec. 4 and Badri's comments add to signs that the group is unlikely to be diverted from its current strategy. Badri himself declined to be drawn on what OPEC oil ministers would decide. Addressing the Oil and Money conference in London, an annual gathering of senior industry executives, Badri urged producers outside OPEC to help tackle a global surplus of crude, which he put at 200 million barrels. “All of us should work together, OPEC and non-OPEC, work together to get rid of this overhang,” Badri said. “There is one problem we are facing: the overhang of 200 million barrels.”
OPEC has invited non-OPEC countries to attend a technical meeting on Oct. 21 at its Vienna headquarters, to discuss the market, Badri told reporters, following on from a similar meeting held in May. Non-OPEC producers including Russia have refused to cooperate with OPEC in cutting output, although forecasters have reduced estimates for supply growth outside OPEC because of the price slump. Badri said oil supply growth from non-OPEC producers might be zero or negative in 2016 because of lower upstream investment. Investment has been cut by around $130 billion this year from about $650 billion in 2014, he said. The International Energy Agency, which advises industrialized countries on oil policy, sees an even larger impact on non-OPEC supply in 2016 from low prices.
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There are billions of barrels of crude in storage just waiting for the price to increase.
The 12-nation cartel, which accounts for 40 per cent of global crude output, said in a statement following its meeting in Vienna that its members were committed to a "stable and balanced oil market. The market is moving through the balancing process". "We will be very gentle in our approach and make sure we don't shock the market in anyway," Saudi Arabian Energy Minister Khalid Al-Falih told reporters after the meeting.
Saying that in future OPEC may need to cap output, Qatari Energy Minister Mohammed bin Saleh al-Sada said: "At this time the atmosphere is positive and the market is comfortable for us." "We've seen that the worst is over. We all tolerated the dropping of oil prices," al-Sada said. OPEC at its last meeting in December in Oatar with other producers like Russia failed to agree on an output ceiling.
OPEC member Iran has been ramping up production to its pre-sanctions levels despite the recent supply glut. Following the meeting, Brent crude for August delivery was trading higher by 0.6 per cent at $50.04 a barrel on the London ICE Futures Exchange.
The Indian basket of crude oils, composed of 73 percent sour grade Dubai and Oman crudes and the rest by sweet grade UK Brent, closed on the previous trading day on Wednesday at $46.38 a barrel of 159 litres, after having fallen below $25 earlier in the year. State-run Indian Oil Corp hiked the petrol price by Rs.2.58 a litre and of diesel by Rs.2.26 per litre both at Delhi with corresponding increases in other states from Wednesday.
No output cut says OPEC oil prices drop ahead meeting in Jun 2016
