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Oil in Global Economy Series: Oil prices rise as Saudi oil ministers vows to end supply glut
Speaking during an investment conference in Riyadh, Saudi Arabia’s oil minister Khalid Al-Falih said that Saudi Arabia is determined and committed to reducing global inventories that have dogged oil prices since 2014. He said that the focus remains on reducing inventories in the OECD countries to its five-year average. Falih said, “We are very flexible, we are keeping our options open. We are determined to do whatever it takes to bring global inventories down to the normal level which we say is the five-year average…… When we get closer to that (five-year average) we will decide how we smoothly exit the current arrangement, maybe go to a different arrangement to keep supply and demand closely balanced so we don’t have a return to higher inventories.”
Last November, OPEC members along with non-OPEC members like Russia agreed to a production cut agreement that aims to reduce global oil supplies by 1.76 million barrels per day. The participants are set to meet at the OPEC headquarter in Vienna on November 30th to decide on the future of the agreement. The market has been concerned with the fact that if the Agreement is not extended beyond its deadline in March 2018, the producers would once again start ramping up production and the aim to bring inventories back to their 5-year average would fail.
The latest report from unofficial sources suggests that Saudi Arabia, Russia, and Iran remains in favour of extending the agreement by another nine months.
WTI is currently trading at $52.4 per barrel and Brent at $6.1 per barrel premium to WTI.
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