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Abu Dhabi, UAEWednesday 12 December 2018

Davos 2018: Falih says exit from oil cuts to be gradual and smooth

Saudi Energy Minister said OPEC could change the level of stocks it was targeting by its output reductions

Khalid Al Falih speaking during the Session "The New Energy Equation" at the World Economic Forum in Davos. World Economic Forum/Manuel Lopez
Khalid Al Falih speaking during the Session "The New Energy Equation" at the World Economic Forum in Davos. World Economic Forum/Manuel Lopez

OPEC and its non-OPEC allies will exit from oil production cuts very gradually and smoothly in order not to shock markets in the early part of 2019 when demand will seasonally slow, the Saudi Energy Minister said on Wednesday at the World Economic Forum in Davos.

Appearing on a panel titled "The New Energy Equation" alongside his Russian and American counterparts, Khalid Al Falih said it was very unlikely cuts could be exited in June when OPEC next meets, but he believed they could be adjusted at some point.

He also said OPEC could change the level of stocks it was targeting by its output reductions.

“I don't see signs of significant oil demand slowdown,” Mr Al Falih said. “The US oil boom is not a threat, as Mexico and Venezuelan output is declining.”

He said global oil demand is likely to hit 120 million barrels per day within the next 25 years.

“We tried to push oil production to a maximum a couple of years back but everyone suffered, including producers and consumers,” Mr Al Falih told the session. “We don't target any level of oil price – such as $60 or $70 a barrel – we target only excessive oil stocks.”

He said OPEC and non-OPEC deals “will expire one day” and producers will have to go back to direct competition with one another.

Strong global oil demand will help offset a steep rise in US oil production and prevent oil prices from collapsing again, agreed Russian Energy Minister Alexander Novak.

US Energy Secretary Rick Perry also said he believed American shale oil would not become a “spoiler” for the oil industry, as global demand was rising fast.

Mr Al Falih said plans for Aramco's IPO remained on track. “We hope that 2018 will be the right time but ultimately we have to make sure the market is ready,” he said.

“We’re ready for the listing but we have to be sure the market is ready, that the time is right, and we will calibrate that as we get closer.”