Oil market moving in right direction: Kingdom

The Kingdom has tempered expectations that world’s major oil producers would look to freeze production next month, with Saudi Energy Minister Khalid Al-Falih telling Reuters that the “market is moving in the right direction” already.

“We don’t believe any significant intervention in the market is necessary other than to allow the forces of supply and demand to do the work for us,” he said in an interview following a speech at the US-Saudi Arabian Business Council in Los Angeles.

Members of the Organization of Petroleum Exporting Countries (OPEC) will meet on the sidelines of the International Energy Forum (IEF), which groups producers and consumers, in Algeria from Sept. 26-28.

Oil rallied last week in part on anticipation of a freeze, but those hopes have waned in the last couple of days.

Speaking publicly for the first time since talk about freezing production surfaced in the last few weeks, Al-Falih said there have not yet been any specific discussions of a production freeze by OPEC, even though world supply remains high. His comments suggest the chances of a pact are minimal, as he pointed to a market rebalancing and steady demand.

Benchmark Brent crude has rebounded sharply since January but struggled to stay above $50 a barrel. Saudi Arabia recently hit a record in terms of barrels-per-day production, and other member nations, including Iran, have said they will boost output.

The Kingdom started to raise production from June to meet rising seasonal domestic demand as well as higher export requirements. Al-Falih did not say whether there was a specific level of output that would be necessary to stabilize the market.

Saudi Arabia produced 10.67 million barrels per day of crude oil, the most in its history, in July, and Al-Falih said on Thursday that production has remained around that level, though he could not cite a specific number for August.

A previous attempt to freeze output at January levels to support prices collapsed in April after Saudi Arabia said it wanted all producers, including Iran, to join the initiative.

Al-Falih said no specific production level for a freeze has been broached yet.

“If there is consensus that emerges between now and the Algiers meeting, Saudi Arabia as always will be a constructive player in these discussions and we will be willing to participate,” he said.