RIYADH, Saudi Arabia– Saudi Arabia may return to its traditional role of balancing supply and demand.
Multiple news reports, including Reuters and the Houston Chronicle, cite the kingdom’s oil ministerKhalid al-Falih as saying the global oil glut that has led to a steep fall in the price of the commodity over the past two years may be nearing an end.
“We are out of it. The oversupply has disappeared. We just have to carry the overhang of inventory for a while until the system works it out,” Falih said in an interview with the Houston Chronicle. “The question now is how fast you will work off the global inventory overhang. That will remain to put a cap on the rate at which oil prices recover. We just have to wait for the second half of the year and next year to see how that works out.”
Saudi Arabia abandoned its role as a “swing producer” in late 2014, when it refused to unilaterally reduce oil production despite signs of an impending glut. This was a primary factor in the 70% drop in crude prices between September 2014 and the start of 2016, when they dropped to a 13-year low of less than $30/bbl.
“Despite the surplus in global oil production and lower prices, the focus of attention remains on countries such as Saudi Arabia which, due to its strategic importance, will be expected to balance supply and demand once market conditions recover,” Falih reportedly said following a meeting with officials of the US Department of Energy in Washington, D.C. “The kingdom’s oil policies are rooted in responsibility, and Saudi Arabia is seeking to maintain that balance while also giving heed to moderate prices for producers and consumers.”
Globaloil prices have staged a tentative recovery over the past few months. On Thursday, both Brent crude and West Texas Intermediate futures were trading near $50/bbl, shrugging off a weaker-than-expected drop in US crude inventories reported by the Energy Information Administration the day before.