US and China seen driving oil demand, no OPEC policy change in April

By REUTERS / Pic By BLOOMBERG

NEW DELHI • Saudi Oil Minister Khalid Al-Falih (picture) said yesterday China and the US would lead a healthy global demand for oil this year, but it would be too early to change OPEC+ output policy at the group’s next meeting in April.

He said total global oil demand is set to grow by around 1.5 million barrels per day (bpd).

“If you look at Venezuela alone, you would be panic, if you look at the US, you would say the world is awash with oil. You have to look at the market as a whole. We think 2019 demand is actually quite healthy,” Al-Falih told Reuters.

In Venezuela, suffering from a political and economic crisis, oil exports have plunged by 40% to around 920,000bpd since Washington slapped sanctions on its petroleum industry on Jan 28.

On the other hand, production in the US hit a record of more than 12 million bpd in February.

The International Energy Agency in a report last month left its demand growth forecast for 2019 unchanged from January at 1.4 million bpd.

Al-Falih said Chinese demand was breaking records month after month, and it was estimated that the country would breach 11 million bpd in 2019.

For Saudi Arabia, he said oil output in April is expected to remain at this month’s level of 9.8 million bpd.

“Aramco (Saudi Arabian Oil Co) is finalising its April allocations today or tomorrow, so we will know more on Monday (today). But my expectation is that April is going to be pretty much like March.”

The OPEC and its allies such as Russia — known as the OPEC+ alliance — will meet in Vienna on April 17-18 and another gathering is scheduled for June 25-26.

Al-Falih said the group is unlikely to change its output policy in April and if required, it will make adjustments in June.

“We will see what happens by April if there is any unforeseen disruption somewhere else, but barring this, I think we will just be kicking the can forward,” Falih said.

“We will see where the market is by June and adjust appropriately.” On Jan 1, OPEC+ began new production cuts to avoid a supply glut that threatened to soften prices. The group agreed to reduce supply by 1.2 million bpd for six months.

Sources recently said the OPEC+ production policy is expected to be agreed on in June, with an extension of the current pact the likely scenario so far, but much depends on the extent of the US’ sanctions on both OPEC members, Iran and Venezuela.

OPEC’s share is 800,000 bpd, to be delivered by 11 members — all except for Iran, Libya and Venezuela, which are exempt from cuts. The baseline for the reduction was, in most cases, their output in October 2018. — Reuters