‘Demand picking supply slowing

Riyadh

OPEC’s strategy of not cutting production in order to maintain market share is working, Saudi Arabia’s oil minister said Monday as he arrived for a meeting of the cartel to decide on output levels.

Asked if this strategy pushed by OPEC kingpin Saudi Arabia was working, Ali Al Naimi told reporters in Vienna: “The answer is yes... Demand is picking up. Supply is slowing. This is a fact. The market is stabilising.”

“You can see that I am not stressed, that I am happy,” he said.

The 12-nation OPEC cartel, pumping some 30 per cent of the world’s oil, is expected on Friday to maintain its official production target of 30 million barrels per day (bpd).

Gulf members, led by Saudi Arabia, will probably resist calls to cut output as they seek to safeguard their share of a market that is plagued by a vast supply glut -- fuelled partly by the boom in shale oil.

“OPEC is likely to confirm its output target of 30m barrels per day given that its strategy of defending market shares is bearing fruit,” said Commerzbank analyst Carsten Fritsch.

“The rapid rise in US crude oil production has been stopped and the oil price has recovered considerably since February.”

Naimi on Monday however refused to be drawn on what the outcome of Friday’s meeting would be, saying: “We haven’t even met yet... I am willing to discuss with everybody.”

OPEC refused in November to cut its official daily oil output target of 30m barrels -- where it has stood for more than three and a half years -- despite the glut.

The move, which sent prices sliding further, was widely regarded as a tactical attempt to boost demand and hurt non-OPEC output, particularly US shale producers which have higher costs.

In recent weeks, oil prices have fought back after the market plunged 60pc between June and January on the back of abundant supplies.

While higher prices boost producers’ revenues they can also weigh on demand -- and in turn economic growth -- harming the cartel in the long run.

However, faced with a precipitous slump in their earnings, some OPEC members -- led by Iran and Venezuela -- have publicly urged the cartel to cut production to support prices. (AFP)