OPEC’s strategy to defend market share over prices is working as oil approaches $50 a barrel amid rising demand and declining output from producers including U.S. shale companies, Kuwait’s acting oil minister said.
Oil will end the year at $50 a barrel and the market will rebalance in the third or fourth quarter of the year, Anas Al-Saleh, the acting oil minister, said in an interview in Kuwait City.
Demand is growing and about 3 million barrels a day of crude supply have been lost due to a drop in global production, he said.
OPEC’s market share “theory has been working well,” Al-Saleh, who is also finance minister and deputy prime minister, said.
“Now we see better prices in the market, demand has been increasing – part of it is outages of production in Canada, Libya, Nigeria and the shale oil.”
Oil prices have fallen by about 35 percent since the November 2014 meeting of the Organization of Petroleum Exporting Countries, when Kuwait joined Saudi Arabia in leading the producers’ group to shift its strategy from supporting prices to defending sales against higher-cost output including US shale.
The decline in prices and oil revenue strained Kuwait’s official budget, though OPEC’s strategy is showing some signs of success with crude rebounding more than 80 percent from a 12-year low in January.
Persian Gulf oil producers are cutting energy subsidies and scaling back some spending. A strike last month by Kuwaiti oil workers slashed crude output in half as thousands of employees stayed away from their jobs to protest a cut in benefits.
Kuwait isn’t planning to sell stakes in Kuwait Petroleum Corp., but is thinking of offering shares in service companies under the state producer known as KPC, Al-Saleh said.
Kuwait, OPEC’s fifth-largest oil producer, is producing 3 million barrels a day and will boost output to 4 million barrels a day by 2020, Al-Saleh said.
The government plans to spend $60 billion on upstream projects in the country until 2021, excluding petrochemicals, joint ventures and projects abroad, he said.
Kuwait is also in “advance talks” to build an oil refinery in Oman, has ongoing discussions to build two refineries in China and India and will open a petrochemical plant with SK Holdings in South Korea within two weeks, he said.
Al-Saleh said Kuwait’s crude production will keep increasing this year, though he declined to give a figure as some projects will undergo maintenance.
Production in two border oil fields shared with Saudi Arabia is due to restart, but not in 2016, he said. Output at Wafra and Khafji has been halted because of environmental and other concerns.
KPC plans to build a refinery to produce 615,000 barrels a day, a petrochemical plant and a receiving terminal for liquefied natural gas at Al Zour on the Persian Gulf coast, Ahmad Al-Jemaz, a deputy chief executive officer at the state refinery unit, said in February.
The Al Zour refinery is set to start in November 2019, with the petrochemical and LNG facilities starting about two years later, he said.
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