Saudi Energy Minister Khalid al-Falih said the oil market is heading in the right direction, but still needs time to rebalance, the London-based newspaper Asharq al-Awsat reported on Monday.
“In my opinion, market fundamentals are going in the right direction, but in light of the large surplus in stockpiles over the past years, the cut needs time to take effect,” he told the newspaper in an interview.
“Current expectations indicate the market will rebalance in the fourth quarter of this year taking into account an increase in shale oil production,” he said.
Falih said there was a relatively big draw of around 50 million barrels from floating storage facilities and a drop in Organisation for Economic Cooperation and Development onshore storage of 65 million barrels compared to July last year. “The market often tends to ignore these criteria and focus on the drop in U.S. inventories that came below expectations.”
In May, the Organization of the Petroleum Exporting Countries and some non-OPEC producers agreed to prolong their accord to curb output by 1.8 million barrels per day until March 2018.
Compliance in April and May was above 100 percent, he said.
OPEC-members Nigeria and Libya were exempted from supply cuts because unrest had curbed their output.
Falih said he expects Libya’s production levels to return to normal levels.
“It is inappropriate to pressurise Libya to slowdown the pace of the recovery of its production,” he was quoted as saying.
He said that production levels in Libya and Nigeria are within the range determined when OPEC decided to cut output for the first time since 2008 in Algeria.
“They shouldn’t be considered a threat to the initiative.”
Output rose by 336,000 bpd in May to 32.14 million bpd led by a rebound in Nigeria and Libya, OPEC said last week in its monthly report.