Oil rallies on hopes for easing output

Ali al-Naimi, Saudi Arabia’s petroleum minister, said oil producers won’t cut production to reduce a global supply glut that has sent oil prices plunging over the past 18 months.

Brent for April settlement slid as much as 37 cents, or 1.1 percent, to $32.90 a barrel on the London-based ICE Futures Europe exchange.

Speaking from an energy conference in Houston, Saudi Oil Minister Ali al-Naimi was quoted by Houston Public Media as saying finding a coordinated solution to lower oil price may require producers to “really work hard”. According to a report from Iran’s student news agency ISNA, the country’s oil minister said the production freeze is “laughable”, because it does not allow Iran to regain its production share. But Iran’s return couldn’t have come at a worse time for an oil market already drowning in excess supply.

“I hope we can solve this problem by 2017, but this cycle is very nasty”, he said, noting that he personally had witnessed six boom and bust cycles.

Iran’s top oil official Tuesday dismissed a proposal by Saudi Arabia to freeze production alongside other OPEC members and Russian Federation.

“It is easy for consumers to be lulled into complacency by ample stocks and low prices today, but they should heed the writing on the wall: the historic investment cuts we are seeing raise the odds of unpleasant oil-security surprises in the not too distant future”, said IEA Executive Director Fatih Birol on Monday.

The IEA said that in the longer term, US production would also recover thanks to improving cost efficiency, lifting output to a record 14.2 million bpd by 2021, compared with a peak of over 9.5 million bpd in 2015.

Al-Naimi, whose remarks about crude oil often affect the market, also said that he’s not concerned about global demand for fossil fuels.

Bernard Aw, market strategist at IG Markets in Singapore said there was a “litany of oil-negative comments”.

“There is no sense in wasting our time in seeking production cuts”, al-Naimi said.

OPEC producers fear any cuts in their output would be immediately replaced by nimble USA shale oil producers, leaving the group with lower oil revenues with little impact on prices, a panel discussion at the IHS Ceraweek event here heard.

Currently, OPEC countries and non-OPEC countries are discussing possible freezing of oil production to stabilize the market situation.

“We had one meeting, four countries agreed”, Naimi said. That is not going to happen because not many countries are going to deliver even if they say they will cut production – they will not deliver.