Oil market to re-balance in 2018, improvement needed – UAE energy minister

The oil market balance is likely to be achieved in 2018 but further improvement is needed as 100 million barrels in oversupply still exists, UAE energy minister said on Thursday.

The Organization of the Petroleum Exporting Countries is reducing output by about 1.2 million barrels per day (bpd) as part of a deal with Russia and other non-OPEC producers. The pact, extended twice and now planned to run until the end of 2018, aims to achieve a healthy oil supply balance benchmarked against a five-year average.

Adherence to the curbs rose to 128 percent in December, Reuters reported citing findings from its survey.

“The compliance will continue very strong for the full year and I have no doubt the market needs further correction - more than 100 million barrels from the five-year average needs to be taken care of,” said Suhail Al Mazrouei, Minister of Energy and Industry, at the Gulf Intelligence UAE Energy Forum 2018 in Abu Dhabi. “We will see a full correction in 2018.”

Oil demand growth for the year is expected to be strong and the energy minister, who is also the new OPEC president, expects new investments to come into the industry.

“NOCs and IOCs will come in time to put more investments - we need to incentives them to come – the pace of that will take care of the rest of the supply and demand imbalance,” Al Mazrouei said.

OPEC will continue to be a strong market manager, while encouraging other countries to join, to achieve a stable market and demand, as well as incentivise others to invest in the industry, he added.

Al Mazrouei said in case any strong shocks to the market or a crisis, OPEC will meet and discuss ways forwards towards market stability. “We will meet if needed. But we need not assume this responsible group is not going to do anything if a crisis comes. You will find us responsive and responsible,” he said.