August 26, 2016 / 9:46 AM / 4 years ago

Saudi energy minister tempers expectations for production freeze

LOS ANGELES (Reuters) - Saudi Arabian Energy Minister Khalid Al-Falih tempered expectations that the world’s major oil producers would look to freeze production next month, telling Reuters on Thursday that the “market is moving in the right direction” already.

Saudi Arabia's Energy Minister Khalid al-Falih talks to journalists before a meeting of OPEC oil ministers in Vienna, Austria, June 2, 2016. REUTERS/Leonhard Foeger/File Photo

“We don’t believe any significant intervention in the market is necessary other than to allow the forces of supply and demand to do the work for us,” he said in an interview following a speech at the U.S.-Saudi Arabian Business Council in Los Angeles.

Members of the Organization of Petroleum Exporting Countries (OPEC) will meet on the sidelines of the International Energy Forum (IEF), which groups producers and consumers, in Algeria from Sept. 26-28.

Oil rallied last week in part on anticipation of a freeze, but those hopes have waned in the last couple of days.

Speaking publicly for the first time since talk about freezing production surfaced in the last few weeks, Al-Falih said there have not yet been any specific discussions of a production freeze by OPEC, even though world supply remains high. His comments suggest the chances of a pact are minimal, as he pointed to a market rebalancing and steady demand.

Benchmark Brent crude has rebounded sharply since January but struggled to stay above $50 a barrel. Saudi Arabia recently hit a record in terms of barrels-per-day production, and other member nations, including Iran, have said they will boost output.

The kingdom, the world’s largest oil exporter, started to raise production from June to meet rising seasonal domestic demand as well as higher export requirements. Al-Falih did not say whether there was a specific level of output that would be necessary to stabilize the market.

Saudi Arabia produced 10.67 million barrels per day of crude oil, the most in its history, in July, and Al-Falih said on Thursday that production has remained around that level, though he could not cite a specific number for August. [nL8N1AY4A1]

Global marker Brent futures gave back some gains following Al-Falih’s comments, slipping as much as 35 cents, or 0.7 percent, over 20 minutes, before recovering somewhat. Brent was trading up 61 cents at $49.66 a barrel by 3:35 p.m. ET (1935 GMT).

A previous attempt to freeze output at January levels to support prices collapsed in April after Saudi Arabia said it wanted all producers, including Iran, to join the initiative. Since Al-Falih’s appointment in April, Saudi Arabia has taken a softer tone toward Iran at OPEC. [nL8N18V24S]

Al-Falih said no specific production level for a freeze has been broached yet.

“If there is consensus that emerges between now and the Algiers meeting, Saudi Arabia as always will be a constructive player in these discussions and we will be willing to participate,” he said Thursday.

Reporting by Nichola Groom in Los Angeles; Additional reporting by Catherine Ngai in New York; Writing by David Gaffen; Editing by James Dalgleish and Steve Orlofsky

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