Saudi Arabia’s energy minister Khalid al-Falih said on Monday oil producers might start discussing in June when to raise output once the market outlook was clearer, even though OPEC was expected to continue output curbs in the second half of 2018.
The Organization of the Petroleum Exporting Countries and non-OPEC producers led by Russia have agreed to extend oil output cuts until the end of 2018 to clear a global glut but have signalled a possible early exit if market overheated.
Falih said in Riyadh that the expectation was that “we will not alter our course in the second half of the year,” adding that this assumed there were no unexpected developments.
“However, we think that the outlook for when we will hit the balanced market will be clearer in June, and we will start thinking of what do we do in 2019,” he said when asked if he sees oil producers starting to raise output in June when OPEC is set to review the supply cuts.
Russia, which this year reduced production significantly with OPEC for the first time, has been pushing for a clear message on how to exit the cuts to ensure the market does not flip into a deficit too soon, prices do not rally too fast and rival US shale firms do not boost output further.
Speaking at a news conference with US energy secretary Rick Perry, Falih said the kingdom and other major oil producers had plenty of supply to respond to any sudden disruptions.
“We have close to 2 million barrels (per day, bpd) of spare capacity so our ability to bring back production in case of need for global supply security goes beyond the amount of cuts we have made,” Falih said. “There will be plenty of supply to respond to any need in the market.”
Under the current deal, OPEC, Russia and other producers are cutting supply by about 1.8 million bpd in an effort to drain global inventories and boost oil prices.
Falih said supply from oil producers which did not take part in the pact, such as the United States, would continue to grow and would add to uncertainty about when inventories would fall.
“We will wait and see it, and review it in June,” he said.
Benchmark Brent crude prices have rallied above $60 per barrel, raising concerns about a further spike in U.S. shale oil output, which has been steadily climbing.