Surging output of U.S. shale oil won’t be a “huge distorter” of efforts by global crude producers to clear a glut, according to OPEC’s president.
The market should re-balance this year, given robust demand and producers’ compliance with their pledges to curtail supply, United Arab Emirates Energy Minister Suhail Al Mazrouei, currently the president of OPEC, said Monday in an interview in Dubai. His Kuwaiti counterpart, Bakheet Al-Rashidi, said he sees world oil consumption growing by 1.6 million barrels a day in 2018 and absorbing additional output from U.S. shale deposits.
“Shale is coming and the expectation is that it will come stronger than in 2017, and this is something that we have to watch,” Al Mazrouei said. “But considering all factors, I don’t think it will be a huge distorter of the market.”
Oil is rebounding from its biggest weekly decline in two years, though gains are limited due to concerns over a resurgence in U.S. shale. The U.S. oil rig count rose last week by 26, the most in a year, to 791, Baker Hughes data showed on Friday. American weekly crude output topped 10 million barrels a day for the first time on record, and the U.S. government forecasts it will balloon to 11 million later this year.
Inventories In Focus
Such an increase would complicate efforts by the Organization of Petroleum Exporting Countries and allied producers to prop up crude prices by curtailing supply. OPEC, Russia and other oil producers agreed in November to extend self-imposed limits on output until the end of this year, seeking to counter a glut fed partly by U.S. shale drillers.
“What concerns us today is the level of inventories that we need to achieve the five-year average, and I see the market going in that direction and achieving balance,” Al Mazrouei said. “How long it will take depends on how long the increase in shale production will take.”
OPEC and other participants in the oil-cuts deal aim for global crude inventories to fall to the average level of the past five years. The U.A.E. is the fourth-largest producer among OPEC’s 14 members, while Kuwait ranks fifth, data compiled by Bloomberg show.
“Demand for this year is expected to be good, if not better than 2017,” Al Mazrouei said. This, together with “good” economic indicators and compliance with output cuts, indicate that the crude market will balance within the year, he said.
Oil prices are currently at about half their 2014 peak, with benchmark Brent crude futures up 2.2 per cent at US$64.17 a barrel in London at 9:34 a.m. local time. Brent tumbled 8.4 per cent last week, in the second consecutive weekly loss.
“It’s a correction only. It will come back,” Kuwait’s Al-Rashidi told reporters in Kuwait City. Kuwait expects cooperation on oil policy to continue beyond 2018, he said. “We will look for criteria to make sure the market is stable at all times.”
--With assistance from Fiona MacDonald