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The decision to extend cut in oil output by OPEC and non-OPEC members for nine months will contribute greatly to rebalancing the world oil market and will have a positive impact on the global economic situation in general, Minister of Energy and Industry HE Mohammed bin Saleh al Sada said.
Talking to mediapersons in Vienna, Sada said,"The move also emphasises the importance of coordination among the oil producing countries, consumers alike, and encourages other oil-producing countries to join the convention," Sada said.
Meanwhile, Saudi Energy Minister Khalid al Falih also expressed confidence that extension of output cuts by major oil producers will ease a global crude glut.
"The market in my opinion is on its way to recovery. The drawdown of inventories has clearly begun and I expect this trend to accelerate," Falih said.
Since December Brent crude, the global benchmark, has recovered to more than $53 per barrel from about $46, although it has dipped below $50 several times.
Falih told reporters that he expected this to"do the trick" of reducing inventories to their five-year average by the first quarter of next year.
Previously, OPEC's strategy was to keep pumping at full tilt in order to flood the market and make life difficult for the Americans, who need a higher price to make money.
This pushed scores of US firms out of business. But with the recent rise, many have returned to the market with a vengeance, and output is nearing record levels.
Despite the slow reduction of the global glut, as well as the prospect of rising output from Libya and Nigeria, Falih said that he was not worried.
"Shale is a important variable but we don't believe it is going to significantly derail or affect what we are doing," he said.
But the market was disappointed that there is no sign that the oil producers are considering steeper cuts to output.
Chris Beauchamp, market analyst at online trading firm IG, called Falih's belief that greater reductions are not needed"quaint".
Alexandre Andlauer from equity research firm Alphavalue called OPEC's strategy"old-fashioned".
Iran's Oil Minister Bijan Zanganeh said that the 'goal' at the moment was a price of $55-60 per barrel, saying this was 'good for both' shale and conventional producers.
"I don't think the cuts are enough for to reach their goal in a nine month period and this is reflecting that," said James Williams, president of WTRG Economics in London, Arkansas.
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26/05/2017
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