The oil market is likely to move into balance by the first quarter of 2018 when the global inventory falls to a five-year average, said Russia's energy minister Alexander Novak on Sunday, as he called for a political resolution to Qatar's diplomatic crisis.
"As of today, (oil) supply is exceeding demand, and we see that global inventory is dropping, but to ensure a true market balance, it is required that the inventory drops down to the five-year average, and we are sure that it will happen in the next few quarters, probably, by the end of the first quarter of the next year," Novak told CNBC on the sidelines of the Astana Expo 2017 in Kazakhstan.
A major crude oil producer, Russia is one of the 24 countries in an Organization of the Petroleum Exporting Countries (OPEC) deal to cut production by 1.8 million barrels a day. The agreement has been extended for another nine months till March 2018.
The agreement has come under scrutiny in the last week after seven countries, including OPEC de facto leader Saudi Arabia, cut ties with Qatar, accusing it of backing Tehran and Islamist groups such as the non-violent Muslim Brotherhood. Qatar has said it does not support terrorism, adding that the diplomatic rift was based on "baseless fabricated claims."
Crude oil futures spiked due to geopolitical risks after the announcements to cut ties but have since come off. The market however is still concerned that the diplomatic rift will hit the OPEC deal, to which Qatar is a signatory.
"We believe that this conflict should be resolved via political means, and we do hope that this conflict in the Middle East will be reconciled, because, really, for the sake of the market and further cooperation expansion on the part of the Persian Gulf a stable and normalized situation is required," said Novak.
This is as the oil market continues to come under pressure from robust U.S. shale production after prices improved after the OPEC deal.
Novak said the group was aware that bringing the oil market into balance would attract investment into the shale industry. The deal however is still a success.
"Therefore, these shale production increases, we foresaw that. Today we have to monitor the situation, and analyze the current developments. In my opinion, the deal is highly effective, and as for shale production recovery, we have to monitor it," he said.
OPEC will hold its next meeting in Moscow next month.