Saudi Oil Minister Al-Falih Sees Output Freeze as ‘Positive’

(Bloomberg) -- Saudi Arabia’s energy minister said an oil-output freeze would be "positive" if it happens, while ruling out a cut in production.

Iran’s oil minister became the latest OPEC member to say he will attend a meeting of producers in Algiers next month to discuss market conditions, including the possibility of keeping crude production at current levels. Saudi Arabia rejected an earlier attempt by some in the Organization of Petroleum Exporting Countries to freeze output at an April meeting in Doha. 

"We will be willing to listen to our colleagues, what they have to offer in that area," Khalid Al-Falih, who became Saudi energy minister in May, said in an interview Thursday in Los Angeles. "I don’t believe that an intervention of significance is required. I certainly don’t advocate a cut."

Crude oil has gained about 13 percent since OPEC said it would meet informally to discuss prices and supply, on speculation that the group could agree to freeze output levels. Benchmark Brent crude settled at $49.67 a barrel on Thursday in London.

There is an increasing agreement between OPEC, non-OPEC producers to move to manage oil production as market forces are not enough to correct prices, OPEC’s Secretary General Mohammed Barkindo told Al Hayat pan-Arab daily Thursday.

OPEC Output

Producers from OPEC will meet on the sidelines of an energy policy group. The meeting of OPEC and other producing countries in April ended without agreement in Doha when Saudi Arabia demanded that Iran be part of any deal to limit output. Iran had ruled out a ceiling on its production until it recovered the output levels it had before the U.S. and European Union tightened international sanctions on its oil industry in 2012.

“A freeze signifies that everybody is content with where the market is today and they want it to be trending in that direction," Al-Falih said. "It is trending towards soaking up and absorbing, removing, the inventory overhang."

OPEC output increased to 33.2 million barrels a day in July, according to data compiled by Bloomberg. The group’s capacity is 36.9 million, with most of that in Saudi Arabia, the world’s largest exporter. That may limit the effect of a freeze.

"There is the freeze that is official, and there is the freeze that is practical," Al-Falih said. "Today, when you think about it practically, many countries today are at their capacity. Their room for an increase are limited, certainly for the short or medium term."

Iran Output

Iran’s production has risen to 3.85 million barrels a day since sanctions were eased in January, Zanganeh said this month, still less than its target for the end of this year of 4 million barrels a day. OPEC as a whole has boosted output to record levels since adopting a Saudi-led decision in 2014 to protect the group’s global market share by forcing out higher-cost producers.

The International Energy Forum, comprising 73 countries that account for about 90 percent of the global supply and demand for oil and natural gas, will meet in Algiers on Sept. 26-28.

“I will participate in this meeting,” Iran’s Zanganeh was cited as saying by the oil ministry’s news service Shana. Zanganeh had not previously committed to attending the meeting, and he didn’t comment on the position Iran will take at the talks. Zanganeh also said he will meet with OPEC Secretary General Mohammed Barkindo “in the near future.”

--With assistance from Anthony DiPaola and Sam Wilkin To contact the reporter on this story: Margot Habiby in Dallas at mhabiby@bloomberg.net. To contact the editors responsible for this story: Nayla Razzouk at nrazzouk2@bloomberg.net, David Marino, Carlos Caminada