Saudi Arabia’s energy minister gave an upbeat message to an audience of industry executives on Wednesday, saying the oil market was at the end of a downturn and producer action to limit supply would help it improve further.
Khalid al-Falih also told the annual Oil and Money conference in London that non-OPEC countries were showing a willingness to freeze and even cut supplies alongside the Organization of the Petroleum Exporting Countries.
“Market forces are clearly working after a testing period of sub-$30 prices. The fundamentals are improving and the market is clearly balancing the supply and demand equation,” Falih said.
“With this contribution of improving fundamentals, rebalancing and the joint action by OPEC and non-OPEC alike, I fully expect market conditions to continue improving.”
Oil is trading near $52 a barrel, less than half its level in mid-2014 when prices began to slide due to oversupply. The downturn deepened after OPEC in November 2014 dropped its traditional role of cutting its supply to support prices.
Appointed as energy minister for the top OPEC oil producer and world’s biggest exporter earlier this year, Falih has overseen a return by the group to managing supply.
OPEC agreed in Algiers on Sept. 28 to reduce production to a range of 32.50 million to 33.0 million barrels per day, which would be its first output cut since 2008. Another meeting on Nov. 30 is set to firm up details of the accord.
Falih said that by freezing production or slightly reducing it, OPEC wanted to signal to the market that it wanted to lower inventories and encourage investment. Spending has fallen due to the price drop, raising concern about supply in the medium term.
“I am happy to see more rigs coming back,” he said, adding that unconventional oil production was important for helping to meet global demand growth.
A challenge for OPEC is to work out how to manage the aspiration of members whose output has been cut involuntarily to pump more. Output levels are not known in some countries that have disruptions, Libya, Nigeria and Venezuela, Falih said.
“We want some clarity on where those producers are as we approach the meeting in November,” he said.
OPEC wants non-member producers such as Russia to contribute to the supply limiting effort and Falih was optimistic that they would deliver.
“Non-OPEC is showing willingness to join, I won’t mention names, to not only freeze but cut production,” he said. “Their contribution to stabilisation could be as significant as those made by OPEC members.”