“It’s unlikely that we will need to continue [production cuts past June.]” – Khalid al-Falih

OPEC may not continue oil production cuts after the middle of the year, according to estimations from Saudi Minister of Energy and Industry Khalid al-Falih. The group is scheduled to meet in May to discuss whether or not production cuts should continue.

“Based on my judgement today, I think it’s unlikely that we will need to continue,” production cuts beyond June, al-Falih said, explaining that the market should have rebalanced by then. Even so, OPEC will reassess the situation when it meets again in May and “all players have indicated their willingness to extend, if necessary,” he said, according to a report from Bloomberg.

Oil prices were down Monday after losing 3% last week. Markets are worried that a higher oil price will encourage renewed drilling activity in the U.S., offsetting some of the production cuts made by OPEC and a group of non-OPEC countries that agreed to join cuts with the group in November of last year. The number of rigs drilling for oil in the U.S. fell for the first time in 11 weeks last week, according to Baker Hughes Industries (ticker: BHI).

“We had a fairly robust rally since the Vienna meeting,” Bart Melek, the head of commodity strategy at Toronto-Dominion Bank in Toronto, said. “If there’s any introduction of ambiguity or uncertainty, you may be tempted to take profit.”

IMF drops forecasted economic growth for Saudi Arabia from 2.0% to 0.6%

Saudi Arabia has been put in a difficult position by the recent fall in oil prices its change in policy brought about. The International Monetary Fund (IMF) has cut its growth outlook for Saudi Arabia on lower oil production in its most recent World Economic Outlook.

The lender now expects the kingdom’s economy to expand by 0.4% compared to 2.0% in its last forecast. The new prediction reflects cuts in government spending as well as the impact of lower oil prices, Gian Maria Milesi-Ferretti, deputy director of the IMF’s research department, said. There is a big adjustment in spending downwards,” he said. “There is an adjustment in taxes upwards, and as a result non-oil growth is not going to be as good as it was during periods of strong oil prices.”

Saudi hopes to make its economy less oil-dependent over the course of this decade, a plan which will likely require the country to tap into debt markets. The government plans to increase debt levels from 7.7% of economic output to 30% by 2020, according to Bloomberg.

October’s sovereign bond was the biggest ever emerging-market issuance, attracting $67 billion of bids, people familiar with the sale told Bloomberg at the time. Saudi Arabia is “very likely” to tap debt markets again in the first quarter, including with an Islamic bond, which generates returns without the use of interest, Finance Minister Mohammed Al-Jadaan said last month.

Meantime, the prospect of an Aramco IPO is still out there.

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