January 18, 2017: Saudi Arabia’s Energy Minister Khalid Al-Falih said on Monday that it is unlikely OPEC would extend its supply cuts beyond June.
Al-Falih told reporters during an energy event in the United Arab Emirates capital Abu Dhabi that demand will pick up in the summer and OPEC wants to make sure markets are well-supplied.
“We don’t think it’s necessary, given the level of compliance we have seen and given the expectations of demand,” Al-Falih said on Monday. “The re-balancing, which started slowly in 2016, will have its full impact by the first half. Of course, there are many variables that can come into play between now and June, and at that time we will be able to reassess.”
Oil prices were down early Monday morning after Saudi Arabia signaled that OPEC is unlikely to extend the supply-cut deal beyond June.
Saudi Arabia is the world’s second largest producer of oil. It has cut production to less than 10 million barrels a day, below its targeted level, and is currently producing at a 22-month low, Al-Falih said.
Out of the total cut of 1.758 million barrels per day, which roughly equals 2 percent of overall global crude oil supply, OPEC members will contribute 1.2 million barrels per day.
Despite production cuts after the OPEC deal, many analysts forecast that the move may not be successful due to lack of commitment from all producers.