Saudi energy minister recommends driving down oil inventories, says supply plentiful

Saudi Arabia’s energy minister said on Sunday he recommended driving oil inventories down and that global oil supplies were plentiful.

“Overall, the market is in a delicate situation,” Khalid al-Falih told reporters ahead of a ministerial panel meeting of top OPEC and non-OPEC oil producers, including Saudi Arabia and Russia.

He said the Organisation of the Petroleum Exporting Countries, of which Saudi Arabia is de facto leader, would have more data at its next meeting in late June to help it reach the best decision on output.

OPEC, Russia and other non-OPEC producers, an alliance known as OPEC+, agreed to reduce output by 1.2 million barrels per day (bpd) from January 1 for six months, a deal designed to stop inventories building up and weakening prices.

Russian Energy Minister Alexander Novak told reporters that different options were available for the output deal, including a rise in production in the second half of the year.

The energy minister of the United Arab Emirates, Suhail al-Mazrouei, said oil producers were capable of filling any gap in the oil market and that relaxing supply cuts was not “the right decision”.

Mazrouei said the UAE did not want to see an increase in inventories that could lead to a price collapse.

Saudi Arabia sees no need to boost production quickly now, with oil at around $70 a barrel, as it fears a crash in prices and a build-up in inventories, OPEC sources said, adding that Russia wants to increase supply after June.

The United States, which is not a member of OPEC+ but is a close ally of Saudi Arabia, wants the group to boost output to bring oil prices down.

Falih has to find a delicate balance between keeping the oil market well supplied and prices high enough for Riyadh’s budget needs, while pleasing Moscow to ensure Russia remains in the OPEC+ pact, and being responsive to the concerns of the United States and the rest of OPEC+, the sources said earlier.

Sunday’s meeting of the ministerial panel, known as the JMMC, comes amid concerns of a tight market. Iran’s oil exports are likely to drop further in May and shipments from Venezuela could fall again in coming weeks due to US sanctions.

Oil contamination also forced Russia to halt flows along the Druzhba pipeline – a key conduit for crude into Eastern Europe and Germany – in April. The suspension, as yet of unclear duration, left refiners scrambling to find supplies.

Novak told reporters that oil supplies to Poland via the pipeline would start on Monday.