Tighter oil market better than early exit from output deal, says Al-Falih

The Organization of Petroleum Exporting Countries (OPEC) would do better with leaving the oil market slightly short of supplies against ending its output-cut deal too early, Reuters reported, citing Saudi Arabia’s Energy Minister Khalid Al-Falih.

“If we have to err on over-balancing the market a little bit, so be it,” Falih said, after meeting Russian Energy Minister Alexander Novak in Riyadh on Wednesday.

“Rather than quitting too early and finding out we were dealing with less reliable information ... Stay the course and make sure that inventories are where the industry needs them,” he added.

OPEC and other major non-member producers, including Russia, have agreed to restrict oil output until end of 2018 to ease oversupply and bolster prices.

The participants in the deal are expected to meet in June to review market conditions and chart future course.

On Wednesday, Falih said OPEC and its allies would need to consider over the next few months how to adjust targets, including how to measure the five-year average of oil stockpiles.

Falih said OPEC should take into account non-OECD inventories, floating storage and oil in transit.

“It is way too premature to discuss an exit strategy ... Do we need to adjust for rising demand and look at forward day cover? How do we deal with non-OECD inventory? (It’s) less transparent and reliable,” he said.

“We have to think of the global market, the center of demand has shifted from OECD to non-OECD.”

“We will discuss it in April and June ... I think we are going to be sticking with our policy throughout 2018 and that is necessary to balance markets”.

Meanwhile, Falih also said that Saudi Arabia plans to keep control on its oil exports in March despite lower domestic need for crude.

The Kingdom will keep its crude exports below 7 million barrels per day (bpd) next month, despite a maintenance shutdown of the 400,000-bpd SAMREF refinery, the news agency reported, based on information from the Saudi energy ministry.