OPEC is "converging towards a good, positive decision" on raising output levels, Saudi energy minister Khalid al-Falih said Tuesday, after meeting with several counterparts in Vienna -- though notably not with Iran's Bijan Zanganeh, who is opposed to rolling back quotas.
"Every minister that I have met with agrees that it's time for us to change course and respond to the market," Falih said.
"Market fundamentals have shifted, and it's a reality that the market demands more in the second half than what has been provided in the first half."
OPEC will decide Friday on the future of its 1.8 million b/d supply cut agreement with 10 non-OPEC partners, led by Russia.
Russia has proposed easing quotas by as much as 1.5 million b/d.
Saudi Arabia reportedly wants a smaller amount, perhaps between 300,000 b/d and 600,000 b/d, to fill any supply gap left by Venezuela's continued decline and US sanctions on Iran, as well as to ease concerns from US President Donald Trump, a key ally, on high oil prices.
Falih said how any output increase would be distributed is yet to be determined. But he added that he was confident a consensus would emerge by Friday's meeting.
"The exact amount, the timing, the manner, the distribution, we have a couple of days to discuss and we're going to do our best efforts to maintain the consensus that have characterized the last couple of years," Falih said.
Zanganeh, however, has said he sees the market balanced, blaming the recent rise in prices on Trump's decision to impose sanctions on Iran and Venezuela.
"The main reason behind the current high oil price is not mainly lack of balance between supply and demand," Zanganeh said in prepared remarks Wednesday to the OPEC Seminar. "On the contrary, the political tension created by the US administration has given rise to market instability and uncertainty, worrying consumers and causing price hikes."
Falih acknowledged that politics were a factor in OPEC's thorny discussions on the future of its 1.8 million b/d supply cut agreement with 10 non-OPEC partners, led by Russia.
But he said any decision taken at OPEC's meeting Friday would be based on supply and demand fundamentals.
"I think I'd be lying to you if I didn't say and acknowledge that there are political forces -- oil has always been influenced by politics," Falih said. "It is a critical commodity to global economic growth. There are internal forces within many countries, both producers and consumers that push for those policies to go one way or another."
He added that OPEC was holding a workshop on what metrics to use to determine whether the market has rebalanced.
The OPEC/non-OPEC coalition has been using the five-year average of OECD commercial inventories as its benchmark.
By OPEC's own analysis, inventory levels are now below the five-year average.
"We've said all along that we should not be making policy decisions on this complex market based on one metric alone," Falih said. "So we will look at this metrics including forward cover of demand going forward, including expectations of where demand is going to be in the second half of 2019."
