Moscow — Saudi oil minister Khalid al-Falih Thursday said geopolitical tensions and speculators were behind the recent rise in oil prices to four-year highs, not collusion by OPEC and its allies.
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OPEC has been increasing its oil production since June and inventories are rising counter-cyclically, Falih said at the Russia Energy Week forum in Moscow.
"That proves the point that fundamentals are not behind it," said the minister, who oversees oil production in the world's largest crude exporter. "The market has a strong influence. The true elephant in the room is geopolitics. This has all combined to feed the market frenzy."
He reiterated that Saudi Arabia has ample spare production capacity which it is ready to use if the market needs it. With the kingdom producing 10.7 million b/d, it has some 1.3 million b/d of spare capacity available, he said.
"We are doing everything we can and then some. The proof will be that demand materializes," he said. "It's not going to be popular for me to say this, but the market is well supplied. Some would even say oversupplied."
S&P Global Platts reported Wednesday that the US State Department was accusing OPEC of withholding 1.42 million b/d of spare capacity from the market. US President Donald Trump has criticized OPEC for not doing more to prevent prices from rising, as he prepares to reimpose sanctions on Iran in November.
"The United States continues to engage with OPEC countries and we encourage them to utilize their spare capacity to ensure world oil supply meets the demand," a State Department spokesperson said in a statement to Platts.
Once the US sanctions on Iran go into effect November 5, Platts Analytics expects Iranian crude and condensate exports to fall to 1.1 million b/d, and to 800,000 b/d by the fourth quarter of 2019, down from 2.91 million b/d in April.
Falih said the market was too fixated on the Iran sanctions and that OPEC and its allies were prepared to keep supplies healthy.
OPEC, Russia and nine other countries have pledged to reduce overcompliance with production cuts that have been in force since January 2017, which they say will result in a 1 million b/d output rise from May levels.
"You have to remember that oil is fungible," Falih said. "It doesn't matter to global supply and demand who's going up and who's going down."
OPEC Secretary General Mohammed Barkindo said that producing countries needed to be better at signaling their intentions, though he complained that the media and the market were not giving the OPEC/non-OPEC coalition enough credit for their efforts at stabilizing the market.
"We need to communicate more," Barkindo said at the forum. "A lot has been done and is being done, led by the two leading suppliers at this conference. We want to urge stakeholders not to be overwhelmed."
Russia, the world's top oil producer, already pumped at record high levels in September, producing 11.356 million b/d, and energy minister Alexander Novak said Wednesday that his country could add up to 300,000 b/d in the next several months.
Falih said Saudi Arabia's November output was likely to be slightly higher than October's projected 10.7 million b/d. State-owned oil company Saudi Aramco sells its crude through term supply contracts, with allocations made monthly, but Falih said he would not rule out some spot sales, though he added that he was not aware of any pending.
"If there are any refiners out there, even if they are not customers, I suggest they contact the company right away and I'm sure they will be supplied," he said.
--Edited by Jonathan Dart, firstname.lastname@example.org