On Monday, Saudi Arabia energy minister Khalid Al-Falih said that he expected OPEC and other oil producing nations to extend a global oil supply cut to extend throughout 2017. Falih went on to add that after years of oversupply, oil markets were showing signs of rebalancing.
Even with indications of markets rebalancing and an OPEC cut of 1.8 million million barrels per day during the first half of 2017, global supplies remain high. Crude oil prices have slipped back below $50 per barrel.
Falih attributes falling prices to a few factors including low demand season and non-OPEC production increases, especially in the U.S. Despite the recent fall of benchmark prices, Falih sees signs for optimism. "I believe the worst is now behind us with multiple leading indicators showing that supply-demand balances are in deficit and the market is moving towards rebalancing," he said.
One major cause for confidence is the growing demand for oil in Asia. With countries such as Vietnam and the Phillipines growing quickly, Falih believes in the next 25 years Asia will account for close to two-thirds of the world's gas demand.
Other industry leaders share Falih's view that OPEC supply cuts will continue moving forward. Fereidun Fesharaki, chairman of energy consultancy FGE, said, "They (OPEC) are looking at (extending) for nine to 12 months. Six months is not enough as we'll still be well above five years average of stocks."
When asked about the rise of renewables as a cause for concern to reduce fossil fuel demand, Falih seemed untroubled. He expressed confidence that oil demand has not peaked and will not do so anytime soon.