Bloomberg/Doha/Dubai


Global crude use is recovering, and prices are steadier as demand matches supply, the senior adviser to Saudi Arabia’s oil minister said.
Prices, which fell by almost half last year, have stabilised at about $60 a barrel based on fundamental market forces, Ibrahim al-Muhanna said at a conference in Doha.
It’s “too early to say” if the Organisation of Petroleum Exporting Countries, which kept output unchanged in November, will change policy when it gathers again on June 5, he said.
“I am confident that demand is and will be stronger,” said al-Muhanna, adviser to Saudi Oil Minister Ali al-Naimi. “Day after day, thousands of people enter the middle class and will further increase demand for energy. Europe may be an exception, but the overall global picture remains positive.”
Oil has gained 17% in London over the past two months as US drillers idled an unprecedented number of rigs in reaction to the biggest plunge in prices since 2008. Crude dropped 61% from June to January after Opec signalled it would leave shale producers and other suppliers to bear the brunt of a glut.
Opec pumps about 40% of the world’s oil, and Saudi Arabia is its biggest producer.
Brent crude, a benchmark for more than half of the world’s oil, fell 4.2% on Friday to $54.67 a barrel in London. US crude inventories may start to stretch the country’s storage capacity, the International Energy Agency said in a report that day. Prices haven’t hit bottom yet as US supply will continue rising, said former Federal Reserve chairman Alan Greenspan.
“Supply will remain healthy, and the price will firm up,” al-Muhanna said. Low oil prices hurt all producers, including his country and Russia, he said. “Saudi Arabia has never been in a price war with anybody.”
Oil markets should be in balance by the third quarter, when demand may even exceed supply, Paul Horsnell, the global head of commodities research at Standard Chartered, said at the Doha conference. US shale production can’t increase at current prices, and Horsnell sees reason to be optimistic about supply, he said.
Growth in US output, currently rising by 1.2mn bpd, will slow by the end of this year to 500,000 bpd-700,000 bpd, Ed Morse, Citigroup Inc’s head of commodities research, said at the conference. The slower rate of increase in US production could last for a decade, Morse said.
Total inventories of crude and refined products in the 34 industrialised nations in the Organisation of Economic Cooperation and Development may approach a record of 2.83bn barrels by the middle of the year, according to the to the International Energy Agency, a Paris-based policy adviser to 29 nations. OECD members were storing 2.7bn barrels of crude and fuel in January.
The IEA lowered estimates for global oil demand growth this year to 1mn bpd, down from a projection of 1.4mn in July, saying lower crude prices are curbing economic expansion in exporting nations such as Russia and Venezuela.
The rebound in crude prices that refiners helped trigger could also be what halts the industry pickup, according to London-based Energy Aspects Ltd.