iofor Alike with agency reports
Saudi Arabiaâ€™s Minister of Energy, Khalid al-Falih on MondayÂ said the oil market was heading in the right direction but still needed time to rebalance.
A London-based newspaper, Asharq al-Awsat, had quoted Falih as saying that there was a relatively big draw of around 50 million barrels from floating storage and a drop in industrialised nationsâ€™ onshore storage of 65 million barrels compared to July last year.
â€œIn my opinion, market fundamentals are going in the right direction, but in light of the large surplus in stockpiles over the past years, the cut needs time to take effect,â€ Reuters quoted Falih as telling the newspaper, in reference to a global deal to curb oil production.
â€œCurrent expectations indicate the market will rebalance in the fourth quarter of this year, taking into account an increase in shale oil production,â€ he said.
Asked about the recent drop in oil prices, Falih said: â€œMarkets determine prices but are themselves driven by unpredictable variables beyond the control of producing nations.â€
â€œShort-term volatility is mostly a reaction to short-term factors … as well as the role of speculators in stock markets that increase market volatility,â€ he added.
Oil prices dipped yesterday, weighed down by a continuing expansion in US drilling that has helped to maintain high global supplies despite an OPEC-led initiative to tighten the market by cutting production.
The oil market is under pressure over the past month from rising production in the United States, Libya and Nigeria, which has taken the edge off an Organisation of the Petroleum Exporting Countries (OPEC)-led initiative to support the market by cutting production.
Brent crude futures were yesterday trading nine cents higher at $47.46 per barrel, while the US West Texas Intermediate (WTI) crude futures were seven cents higher at $44.81 per barrel.
Both benchmarks are down around 14 per cent since late May, when producers led by OPEC extended their pledge to cut output by 1.8 million barrels per day (bpd) by an extra nine months.
â€œThe market often tends to ignore these criteria and focus on the drop in US inventories that came below expectations,â€ Falih said.
According to him, compliance in April and May with the OPEC-led output deal was above 100 per cent, adding that he expects Libyaâ€™s production to return to normal levels.
OPEC members Libya and Nigeria were exempted from the supply cuts because unrest had curbed their output.
â€œIt is inappropriate to pressure Libya to slow the recovery in its production,â€ he was quoted as saying.
He said production levels in Libya and Nigeria were within the range determined when OPEC, meeting in September last year in Algeria, decided to cut output for the first time since 2008.
â€œThey shouldnâ€™t be considered a threat to the initiative,â€ Falih added.
OPECâ€™s output rose by 336,000 bpd in May to 32.14 million bpd, led by a rebound in Nigeria and Libya, OPEC said recently in its monthly report.