Saudi Energy Minister Khalid Al Falih said the oil market is heading in the right direction but still needs time to rebalance, the London-based newspaper Asharq Al Awsat reported on Monday.
“In 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,” he told the newspaper, referring to a global deal to curb oil production.
“Current expectations indicate the market will rebalance in the fourth quarter of this year, taking into account an increase in shale oil production,” he said.
Asked about the recent drop in oil prices, Falih said: “Markets determine prices but are themselves driven by unpredictable variables beyond the control of producing nations.”
“Short-term volatility is mostly a reaction to short-term factors … as well as the role of speculators in stock markets that increase market volatility.”
Oil prices dipped on Monday, weighed down by a continuing expansion in U.S. drilling that has helped to maintain high global supplies despite an Opec-led initiative to tighten the market by cutting production.
The price of oil is down around 14 per cent since late May, when producers led by the Organisation of the Petroleum Exporting Countries extended their pledge to cut output by 1.8 million barrels per day (bpd) by an extra nine months.
Falih said there was a relatively big draw of around 50 million barrels from floating storage and a drop in industrialised nations’ onshore storage of 65 million barrels compared to July last year.
“The market often tends to ignore these criteria and focus on the drop in US inventories that came below expectations,” he said.