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LONDON—Saudi Arabia's energy minister delivered an optimistic message to the oil industry's biggest operators on Wednesday, saying a crippling oil-price downturn was coming to an end and urging new investments to avert a supply shortage in the future.

Speaking at the Oil & Money conference here, Khalid al-Falih, the top oil official in the country that exports more crude than any other, said the Organization of the Petroleum Exporting Countries' agreement last month to modestly cut its output would speed along a rebalancing of supply and demand already under way.

"We are now at the end of a considerable downturn," Mr. Falih told an audience that included top executives from oil firms such as Exxon Mobil Corp., Royal Dutch Shell PLC and Total SA.

In his five months as Saudi energy minister, Mr. Falih has overseen a significant change in the kingdom's oil policy, turning it away from strategies aimed primarily at surviving an era of ultralow prices. Mr. Falih has instead pointed the kingdom back in the direction of its traditional role of stabilizing prices by regulating the output of OPEC, the 14 nation cartel that controls over a third of world crude production.

OPEC agreed to trim its output by 1% to 2% but left many of the details of the cut to its next meeting on Nov. 30. Many oil-industry analysts have been skeptical that OPEC will follow through, but Mr. Falih said the accord will help lift prices and spur more oil investments.

Mr. Falih said the oil industry was starved of financing during a downturn over the past two years in which crude prices fell to less than $28 a barrel this year from heights of $114 a barrel in 2014. According to Wood Mackenzie, a Scottish energy consultancy, the oil industry has slashed $1 trillion in capital spending in the past two years.

Mr. Falih said the industry needed $24 trillion in new capital spending if it is to meet global energy demands over the next 25 years. Speaking to an audience that included bankers from London's powerful financial institutions, Mr. Falih, Falih said the reluctance many of them had to lend to energy companies would ease as oil prices rise.

Mr. Falih warned of a supply shortage in the future if these investments aren't made because global oil demand would keep growing. "It could grow faster as the global economy improves," Mr. Falih said, citing an increasing car fleet in China and rising consumption in India.

Mr. Falih said he was encouraged by the signals from non-OPEC producers that they would help to stabilize the oil market. Russia, the world's largest producer of crude but not an OPEC member, sent officials to meet with OPEC members such as Algeria, Saudi Arabia and Venezuela in Istanbul earlier this month.

Write to Benoit Faucon at benoit.faucon@wsj.com and Kevin Baxter at Kevin.Baxter@wsj.com

(END) Dow Jones Newswires

October 19, 2016 06:45 ET (10:45 GMT)

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