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Saudi Arabia says prefers tighter oil market to early exit from cuts

Reuters  |  RIYADH 

By El Gamal

RIYADH (Reuters) - would do better to leave the market slightly short of supplies rather than ending too early a deal on cutting output, Saudi Minister said on Wednesday.

prices have slid nearly 15 percent in the past three weeks, together with a broader decline in the stock market, due to fears about global inflation and rising U. S. production.

The decline comes at a bad time for Saudi Arabia, which needs prices if it is to succeed in turning the planned share listing of giant this year into the world's biggest share sale.

"If we have to err on over-balancing the market a little bit, so be it," Falih said after meeting Russian Minister in Riyadh. Novak and other Russian officials also met Saudi in the Saudi capital on Wednesday.

"Rather than quitting too early and finding out we were dealing with less reliable information ...

Stay the course and make sure that inventories are where the industry needs them," Falih said.

The Organization of the Exporting Countries, of which is de-facto leader, has agreed to extend supply cuts with and other producers until the end of 2018.

Moscow, however, has signalled a gradual exit might be needed from the second half of this year.

Falih has insisted the cuts will continue throughout 2018 and, to avoid shocking the market, any exit after that would be very gradual.

On Wednesday, Falih said and its allies would need to consider in coming months how to adjust targets, including how to measure the five-year average of stockpiles.

has made the five-year average its main target and managed to reduce the glut to 100 million barrels above that benchmark, from 300 million when the cuts began in 2017.

Falih said should take into account inventories, floating storage and in transit. At present, targets are based on stockpiles in industrialised nations.

"It is way too premature to discuss an exit strategy ... Do we need to adjust for rising demand and look at forward day cover? How do we deal with inventory? (It's) less transparent and reliable," Falih said.

"We have to think of the global market, the centre of demand has shifted from to "

"We will discuss it in April and June ... I think we are going to be sticking with our policy throughout 2018 and that is necessary to balance markets".

SAUDI EXPORT RESTRAINT

As Novak and Falih met in Riyadh, the Saudi Ministry said it would restrain exports in March despite lower domestic need for crude.

The kingdom will keep its crude exports below 7 million barrels per day (bpd) next month, despite a maintenance shutdown of the 400,000-bpd SAMREF refinery, the ministry said, confirming a plan given by industry sources.

"remains focused on working down excess inventories," a said in a statement.

"Market volatility is a common concern for producers and consumers, and the kingdom is committed to mitigating this volatility and moderating its negative impacts by responsibly meeting its pledges" under the OPEC-led supply deal.

Mohammad Barkindo, who was also in Riyadh, said demand would grow this year at healthy levels and that data pointed to continued high compliance by producers in January with their pledges under the supply deal.

has delivered more than 100 percent of the output cuts that members pledged under the deal, according to figures from and other analysts, helped in part by an involuntary drop in Venezuela, where output is falling amid an economic crisis.

The Saudi ministry also said production by Aramco in March would be 100,000 bpd below February's level, suggesting will continue to pump less than its target.

(Additional reporting by in Dubai; Writing by Dmitry Zhdannikov, and Alex Lawler; Editing by Dale Hudson)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Wed, February 14 2018. 21:29 IST
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