Opec ministers say oil market is moving in right direction

Opec ministers gathering in Vienna for the group's biannual meeting said the oil market is moving in the right direction as a supply glut dissipates.

While Saudi Arabia – the architect of the Organisation of Petroleum Exporting Countries’ current policy – remained silent, ministers from the United Arab Emirates and Nigeria signalled that the strategy of letting low prices eradicate surplus production is working.

Some of the world’s biggest oil traders said accelerating demand is also helping to rebalance the market.

“From the beginning of the year until now, the market has been correcting itself upward,” UAE oil minister Suhail Al Mazrouei said.

“The market will fix itself to a price that is fair to the consumers and to the producers.”

Prices

Those comments, echoed by his Nigerian counterpart, suggest renewed optimism among producers after oil prices rose more than 85 percent in New York since touching a 12-year low in February.

There were still signs of division in the group, with Venezuelan energy minister Eulogio Del Pino saying the price recovery had more to do with unexpected supply disruptions than a successful Opec strategy.

Forecasters including the International Energy Agency and Goldman Sachs say the crude glut is finally dwindling as the Saudi approach of squeezing high-cost suppliers – opposed by most Opec members when it was unveiled in late 2014 – finally pays off. The group is unlikely to change direction this week, according to analysts .

Urgency

“I think the market trends are better now” and the sense of urgency that spurred producers to mull an agreement to freeze production in April has dissipated, Emmanuel Ibe Kachikwu, Nigeria’s minister of state for petroleum resources, said.

While prices are moving “in the right direction, I think it needs more acceleration of the pace,” he said.

While Venezuela’s Mr Del Pino lamented the failure of the freeze agreement, which Saudi Arabia blocked because Iran wouldn’t participate, he said unplanned disruptions in Canada, Nigeria and Kuwait had effectively capped crude production.

“If you take into account what happened in the last three or four months,” there has been a “de facto” freeze, Mr Del Pino said.. More than 3 million barrels of daily production are out of the market, he said.

After two and a half years of oversupply, oil traders also see signs supply and demand are getting close to being in balance.”The rebalancing is happening a bit faster than anticipated because of the disruptions,” Marco Dunand, the head of Geneva-based trading house Mercuria Energy said .

– Bloomberg