Saudi Energy Minister Khalid al-Falih said the oil market is “in a good place today in terms of supply and demand balances and inventories” after lifting restrictions on output in June, hoping oil producers would sign a deal in December to extend cooperation to monitor and stabilize prices.
He said the Organization of the Petroleum Exporting Countries (OPEC) and its allies hoped to extend their cooperation on oil supply when they meet in December in Vienna.
“It will become an open-ended agreement to continue to monitor (the oil market) and stabilize it,” Falih said during his speech at Saudi Arabia’s Future Investment Initiative 2018 (FII).
FII forum kicked off on Tuesday in Riyadh with a panel discussion on global investments and technology. The event is held under the patronage of Custodian of the Two Holy Mosques King Salman bin Abdulaziz Al Saud, and the leadership of Crown Prince Mohammed bin Salman, who is also the chairman of PIF and the Council of Economic and Development Affairs.
“I don't rule out that the Kingdom’s production which has been 9-10 (million barrels per day) over the last decade or so will be a million to two million (barrels) higher,” Falih said, without providing a time frame.
The Saudi minister expected demand for oil, which currently stands at around 100 million bpd, to rise to 120 million bpd over the next three decades.
Falih indicated that around 25 producing countries from OPEC and non-OPEC are expected to sign in December a long-term cooperation agreement following the success of their coordination that helped boost prices.
“What we are hoping to do is to ink an agreement amongst at least the 25 (producers) that are signatories to the current agreement. Hopefully, more countries will join,” he stated, adding that it will become an open-ended agreement to continue to monitor and work together to stabilize the markets.
Oil producers will continue to monitor supply and demand in the market especially with the Iran sanctions looming and would be ready to act if needed according to the Saudi minister.
“We will decide if there are any disruptions from supply, especially with the Iran sanctions looming. Then we will continue with the mindset we have now, which is to meet any demand that materializes to ensure customers are satisfied,” indicated Falih.
The minister also noted that if oil supply continues to build up, “we will have the mechanism to reconvene... and bring supply and demand in balance and to prevent inventories from growing”.
“It is a very unpredictable situation from supply in particular, but demand also has its uncertainties with the trade frictions,” he said.
Also at the forum, UAE Minister of State and Group CEO of the Abu Dhabi National Oil Company (ADNOC), Sultan al-Jaber announced that the global oil industry is about to break the historic milestone of consuming more than 100 million bpd.
He predicted that by 2040, global consumption will climb by another 10 million per day, demonstrating that demand for hydrocarbons continues to gain strength amidst major market expansions and a rising global GDP.
As demand for petrochemicals rise by an approximate 60 percent over the next two decades, Jaber indicated that petrochemicals sector is expected to become the single-largest driver of oil demand growth by 2050.
“The era of oil and gas is far from over,” noted Jaber, adding that: “In fact, market trends point to robust growth in all segments. Not only is petrochemical growth quickly becoming the biggest driver of oil demand, but we expect the market for natural gas to grow 40 percent by 2040. This expanding global energy map holds ample opportunity for energy companies that are willing to adapt and transform.”
Over the past two years, ADNOC has reduced its operating expenditure significantly, noted Jaber.
“We are deploying our capital more efficiently, and leveraging the capital and debt markets – where and when it makes sense,” he stressed.
He did, however, assert that the company constantly seeks innovative, commercial, financially savvy strategic investors and value-add partnerships to enable its ambitious smart growth plans.
“Saudi Arabia, as the largest oil producer in the world, is taking steps that will ensure its long-term sustainable economic development and prosperity. It is ambitious, bold and achievable. Most importantly, Saudi Arabia’s economic transformation, will have far-reaching benefits, not only for the Kingdom but for our region and for the entire world,” concluded Jaber.
