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EghtesadOnline: Almost 1 billion barrels of oil held in inventories must be used up before global supply and demand are closer to balance, Dana Gas PJSJ Chief Executive Officer Patrick Allman-Ward said.

“We still have a significant global storage of oil, close to a billion barrels,” Allman-Ward said Tuesday in a Bloomberg TV interview with Francine Lacqua at the World Economic Forum in Davos, Switzerland. Dana Gas, based in the United Arab Emirates, explores for and produces natural gas in the Middle East. Gas is often sold at prices linked to crude oil.

The Organization of Petroleum Exporting Countries and 11 other producers, including Russia, agreed to cut output by a collective 1.8 million barrels a day to remove a surplus that had kept crude prices languishing at about $50 a barrel for the past two years. The six months of cuts are scheduled to expire in June. Brent crude, an international benchmark, was 62 cents higher at $56.48 a barrel in London at 11:53 a.m. local time.

“There is some optimism that with the balancing that was already taking place from the third quarter of last year, that there would not be necessity for continued cuts,” Allman-Ward said. “We’ll need to work that storage away before we can really say we’re in a firm supply-demand balance.”

The potential for increased production from Libya and Nigeria will mean price volatility in crude for the rest of the year, he said. “There’s a lot of latent capacity in the system that is still not produced from Libya and Nigeria, and of course the oil shale is coming back in a big way,” the CEO said.

Dana Gas is still owed more than $260 million from the Egyptian government and in excess of $720 million from the Kurdish region in northern Iraq, he said. “In Egypt, as the macroeconomic position continues to improve, we are more hopeful” about getting paid back, Allman-Ward said. From the Kurdish region, “we are getting paid, small amounts, and we hope that that will continue and ultimately we’ll be able to recover the full amount.”

The company has three exploration blocks in Egypt, and “we’ve got some very exciting news I hope to be able to talk about in the very near future,” he said. If it is successful, it could have gas “in the trillions of cubic feet,” he said. “The first signs are encouraging.”

oil market Oil Glut Dana Gas gas market Patrick Allman-War