Saudi energy minister Khalid al-Falih on Thursday said that he saw an extension of the OPEC/non-OPEC production cut agreement likely if global oil inventories do not fall to sufficient levels.
"There has been a strong level of commitment in the past three months," Falih said at the GCC Petroleum Media Forum in Abu Dhabi. "Unfortunately we still have not reached our goal."
If stocks remained too high, "we will extend this agreement to nine or even 12 months (from January 1) because our target is the level of (inventories), and this will be the indicator of the success of our initiative," he added.
OECD stocks remained 336 million barrels above the five-year average at the end of February, the International Energy Agency said in its most recent monthly oil market report.
Article continues below...
OPEC ministers have said their aim with the production cuts is to bring inventory levels down to the five-year average.
Under the six-month deal, which expires in June, OPEC was to cut 1.2 million b/d of crude production from October levels and 11 key non-OPEC producers led by Russia to cut output by 558,000 b/d.
OPEC ministers will meet on May 25 in Vienna to decide whether to extend the production cuts, with a monitoring committee composed of Kuwait, Algeria, Venezuela, Russia and Oman to provide a formal recommendation before that.
"We will have increasing demand for the rest of the year, and I expect we will have an extension of this agreement," Falih said. "We are still trying to know about the trends of other countries to know that we have a consensus on the extension."
Though many ministers have indicated their support for an extension of the production cuts, Falih said that OPEC was "still communicating with many countries. And we will work to watch the market for April and May to ensure our colleagues in OPEC and outside OPEC will take the right measures in this regard."
He said the production cut agreement, which was signed late last year, was needed to stimulate investment in the oil sector after two years of a price slump prompted by the oversupply in the market.
"We in Saudi Arabia, and I think the market will agree, are concerned with what will happen in three to four years," Falih said. "The levels of investment in the producing counties and oil companies continue at the low levels we have seen during the last two years. And what we agreed with our partners, countries that are outside OPEC, was an important agreement."
--Nastia Astrasheuskaya, firstname.lastname@example.org
--Herman Wang, email@example.com
--Tamsin Carlisle, Tamsin.firstname.lastname@example.org
--Edited by E Shailaja Nair, email@example.com