Saudi Arabia expects that the Organization of the Petroleum Exporting Countries (OPEC) members and non-OPEC producers will agree to an extension to the oil supply cuts, President of OPEC Conference said on Thursday prior to the OPEC meeting.
Khalid Al-Falih, Saudi Arabia's minister of energy, industry and mineral resources and the president of the OPEC conference said at his opening speech during the 173rd (Ordinary) OPEC meeting, that it was apparent last May that more work was needed.
The Declaration of Cooperation deemed an unprecedented historic milestone, between OPEC and non-OPEC producers followed to help stabilize the global oil market by agreeing to voluntarily reduce oil output to 1.8 million barrels per day.
He explained that the Organization for Economic Co-operation and Development stock overhang was 280 million barrels above the moving five-year average, but that it had since fallen by almost 50 percent to 140 million barrels for the month of October.
'Crude in floating storage is also down by an estimated 50 million barrels since June, and the drawdown applies broadly to all regions, including both crude and products. In fact, products are already at their five-year average,' he stated.
He also said that the 'oil market witnessed the market structure flipping into backwardation for both Brent and WTI for the first time since 2014, indicating the market’s gradual move towards a more balanced condition.'
'Market stability has improved and the sentiment is generally upbeat,' he said and added that the rebalancing trend has accelerated and inventories are on a generally declining trend.
One year ago, OPEC members on Nov. 30 unanimously agreed to lower oil production by 1.2 million barrels per day (bpd) down to 32.5 million bpd. This was the first production cut by the organization in eight years, and its first intervention in the global oil market since mid-2014 when oil prices began to fall.
The agreement became effective on Jan. 1, 2017. Some OPEC and non-OPEC countries would like to extend the oil cut decision beyond the expiry date of March next year until the end of 2018.
By Gulsen Cagatay
Anadolu Agency
energy@aa.com.tr