Surging output of U.S. shale oil won't be a "huge distorter" of efforts by global crude producers to clear a glut, OPEC's president said Monday.
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 the Organization of the Petroleum Exporting Countries, said in an interview in Dubai.
The market is "on course to restoring balance" for the first time since 2014, OPEC's Secretary-General Mohammad Barkindo said at a conference in Cairo.
Oil demand is expected to grow by 1.6 million barrels a day in 2018, the same level as last year, and crude inventories are continuing to dwindle as OPEC and some other producers pursue output cuts until the end of the year, Barkindo said Monday.
Venezuela is proposing that OPEC seek a five-year deal for cooperation on output with allied producers beyond 2018, he said.
"Venezuelans see that the cooperation with non-OPEC producers shouldn't end," Barkindo told reporters in Cairo. "They have put forward a proposal for the time frame of the cooperation, and that was five years. But this proposal isn't final, and it's a work in progress."
Oil is rebounding from its biggest weekly decline in two years, though gains are limited because of 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 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.
Gasoline prices in the U.S. have fallen in the past week, according to a daily survey by the travel club AAA. The national average price for a gallon of gasoline Monday was $2.58, down from $2.60 a week before. In Arkansas, the average price Monday was $2.37, down from $2.39 a week before.
A significant increase in shale oil production would complicate efforts by OPEC, Russia and other producers to prop up crude prices by curtailing supply. The 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.
"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.
"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," he said. "How long it will take depends on how long the increase in shale production will take." Participants in the oil-cutting accord aim for global crude inventories to fall to the average level of the past five years.
"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.
Barkindo said producers' "unprecedented conformity" with their targets for reducing output is driving progress toward a balanced market. Compliance reached a record level of 129 percent in December, for a monthly average of 107 percent last year, and preliminary estimates show that compliance in January will surpass December's level, he said.
Oil prices are currently at less than half their 2014 peak. Benchmark Brent crude tumbled 8.4 percent last week, its second consecutive weekly loss.
"It's a correction only. It will come back," Kuwaiti Oil Minister Bakheet Al-Rashidi told reporters in Kuwait City, referring to the recent losses. 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," Al-Rashidi said.
Information for this article was contributed by Wael Mahdi, Salma El Wardany, Tamim Elyan and Fiona MacDonald of Bloomberg News.
Business on 02/13/2018
Print Headline: OPEC unfazed by surge in shale