There is no evidence a pact by global oil producers to curb output needs to be adjusted, Saudi Arabia’s Energy Minister Khalid Al-Falih said on Saturday, describing the recent weakness in crude prices as an overreaction to statistical glitches.
Al-Falih also said the decision by Saudi Arabia and some of its allies to cut ties with Qatar this week would not affect the oil pact.
“I do not expect the diplomatic and political issues that have surfaced with Qatar to have any impact whatsoever on the oil production agreement,” he told reporters in Kazakhstan.
Crude prices fell about 4 percent this week after US data showed a surprise 3.3 million barrel rise in crude inventories to 513.2 million barrels.
The Saudi energy minister said that the data was a “local phenomenon.”
“Time will correct for this statistical glitch that we saw last week,” Al-Falih said, adding that the results of last month’s agreements to extend a global production cut would “materialize over weeks and months.”
“I am convinced that the overall trend for the market is that of rebalancing,” he said.
Al-Falih said he would discuss the oil market with Kazakh Energy Minister Kanat Bozumbayev and Russian counterpart Alexander Novak in the Kazakh capital. “My expectation is that all three countries will continue to support the agreement fully,” he said.
Oil prices rose on Friday after a pipeline stoppage in Nigeria but crude still ended the week down nearly 4 percent on persistent worries about global oversupply.
“I do not think it is anything more than a temporary stabilization,” said Gene McGillian, manager of market research at Tradition Energy in Stamford, Connecticut, adding that traders were short-covering ahead of the weekend.
“The increases in production will still drag us lower,” he said.
Oil markets have been under pressure in part because Nigeria and Libya, the two members of the Organization of the Petroleum Exporting Countries (OPEC) exempt from output cuts, were boosting production.
Last month, OPEC and other key producers agreed to extend a November agreement to decrease production by almost 1.8 million barrels per day (bpd) and hold output there until the first quarter of 2018.
US production is also increasing. Drillers added 8 oil rigs in the week to June 9, bringing the total count to 741, the most since April 2015, energy services firm Baker Hughes said on Friday.
US data this week showed a surprise 3.3-million-barrel build in crude stocks to 513.2 million barrels. Inventories of refined products also rose, despite the start of the peak-demand summer season.
“The drop (in gasoline demand) a week after Memorial Day demoralized the market,” said McGillian, referring to the late-May US holiday weekend, which marks the beginning of the driving season. Americans have driven less than expected compared to this time last year.
US refined product inventories are now back above 2016 levels and well above their five-year range, reflecting an unexpected slowdown in the US demand, Jefferies said.
Asian markets are also oversupplied, with traders putting excess crude into floating storage, an indicator of a glut. Thomson Reuters shipping figures show at least 25 supertankers sitting in the Strait of Malacca and the Singapore Strait, holding unsold fuel.