Oil ministers from Saudi Arabia and the UAE said on Sunday said that global supplies of crude were plentiful and indicated that production cuts would remain in place to help rebalance oil markets.
Saudi Arabia’s energy minister Khalid Al Falih and the UAE energy minister Suhail Al Mazroui made the comments while speaking to reporters during the ministerial meeting of Opec and non-Opec producers in Jeddah, Saudi Arabia.
“Overall the market is in a delicate situation,” Al Falih said, recommending reducing oil inventories to boost oil markets.
He also said the Organisation of the Petroleum Exporting Countries (Opec) would have more data at its next meeting in late June to help it reach the best decision on output.
In similar comments, Al Mazroui said that relaxing supply cuts was not “the right decision” and UAE does not want to see an increase in inventories that could lead to prices collapsing.
On the other hand, 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.
Opec producers and its allies including Russia are cutting production by about 1.2 million barrels per day to bring down oil inventories and support oil prices. The deal which came into effect earlier this year will continue till the end of June.
Al Falih also said the attacks on Saudi energy assets had put security of oil supply at risk but not affected his country’s output. He called on Saudi Arabia’s partners to condemn the attacks.
Two major attacks took place on Saudi Arabia’s oil tankers as well as on pipeline pump stations in the last week, causing oil prices to spike on supply concerns.
In the first incident on May 11, two oil tankers from Saudi Arabia were attacked off the coast of Fujairah. And in another incident on Tuesday, Saudi Aramco had to temporarily shutdown an oil pipeline following a drone attack on its facilities that transport oil from Eastern province to Yanbu port.
Oil prices are currently trading higher following the attacks with Brent trading above $72 per barrel when markets closed on Friday with West Texas Intermediate at $62.76 per barrel.
Analysts expect oil prices to rise further but increase in production from the US shale producers will counter the price hike.
“We could be seeing a sharp rise in oil prices given the implied impact of heightened military activity in the GCC region due to a US-Iran situation however the US’s rising inventory figures could be countering that for now,” said Issam Kassabieh, senior financial analyst at Menacorp adding Opec would double its efforts in monitoring global supply levels due to current geopolitical situation.
“Geopolitical tensions could be attempting to test correlation between supply and demand dynamics and prices in the oil market.”
The global inventories particularly in the US inventories are high and are still raising, which suggests that there is no lack of supplies and the market is somehow oversupplied, according to Dr Sara Vakhshouri, President of SVB Energy International.
“The main challenge for the members is to find out how much Iran’s formal and especially the informal oil sales in the grey market would be.”
(With inputs from Reuters)