Al-Naimi: Oil market situation is ‘great’

VIENNA: Saudi Arabia considers the current oil market situation to be "great", its Minister of Petroleum and Mineral Resources Ali Al-Naimi said as he arrived in Vienna for a meeting of the Organization of the Petroleum Exporting Countries (OPEC).
"Let me tell you this, this is the best environment for the market. Supplies are plentiful, demand is great, balanced - inventories are balanced," Al-Naimi said yesterday when asked by reporters to comment on the state of the oil market.
OPEC, which meets on Friday, is widely expected to keep output policy unchanged.
Asked how he saw oil supplies in the future and whether there might be too much oil, he said: "Same thing, the future is the future. If it's too much it is good for the market."
Reports say that oil supply in Nigeria, Africa's biggest producer, Algeria and Libya — which pump 15 percent of OPEC's 30 million barrels per day (bpd) — has been underperforming for some time and little if any growth is expected in the medium term.
And rising violence since the Arab Spring of 2011 and unappealing commercial terms for foreign investors are making it even more difficult for some African OPEC nations to boost production capacity.
"The Arab Spring is a bigger deal than we expected," said Antoine Halff of the International Energy Agency, introducing an IEA report earlier in May which lowered output forecasts for African OPEC members.
Unable to expand supplies in the good times, the African OPEC members would be reluctant to contribute to any cut in OPEC output.
"If we enter a bumpy period for demand over the next several months, it makes it much easier for OPEC to control the price with many members not expanding production," said Paul Tossetti, analyst at PFC Energy.
Nigeria, Libya and Algeria have been posting falling or stagnant output in the last few years.
According to the IEA's report launched earlier this month, Nigeria, Angola, Libya and Algeria will collectively post zero growth in production capacity during 2012-2018, when OPEC's overall capacity is forecast to rise by 1.75 million bpd to 36.75 million bpd.
Nigerian crude exports are running at a four-year low below 2 million bpd, suffering from oil theft and increased sectarian violence.
It has also felt the heat from the rise of shale oil in the United States, losing ground in its most lucrative export market and diverting sales to Asia. Exports of Nigeria's crude to the United States dropped to zero for a week in March.
OPEC does not hold a common position on the benefits or otherwise of US shale.
Nigeria should add a small net 85,000 bpd of capacity to 2.66 million bpd by 2018, the IEA forecasts.
Although Libya swiftly restored output after the 2011 uprising, a new wave of unrest has kept flows at around 1.4 million bpd, less than it pumped before the conflict.
Algerian output has fallen below 1.2 million bpd from a peak of 1.37 million bpd in 2007.
The governments are trying to boost output. Algeria has said it plans to review fiscal terms and a test will come later this year when the government relaunches a licensing round. Libya announced a new bidding round will be held at end-2013.