Qatar’s Minister of Energy and Industry has predicted oil to begin rebalancing after one more dip.
HE Dr Mohammed bin Saleh Al Sada said oil markets are poised to rebalance as low prices cannot last long.
“We expect that we will go through one more downturn cycle of oil price, but we will recover. The market is definitely going to balance itself because today’s oil price is not sustainable whatsoever,” he told a conference in London.
Al Sada, who holds Opec’s rotating presidency this year, called on oil producers outside the group to assist in reducing the global oil glut, signalling once again that the body won’t make output cuts alone, reported Bloomberg.
“It is vital the market addresses the issue of the stock overhang,” Secretary-General Abdalla El-Badri said at a conference in London, adding: “It should be viewed as something Opec and non-Opec tackle together.”
On the back of Opec abandoning its output ceiling in December, crude sank to its lowest in more than 12 years this month, as supply flooded demand.
This was exacerbated by Russia pumping near record levels and US shale fields proving more resilient than forecast.
While all parties seek to retain their market share, an agreement between Opec and rival producers to harness output volumes has proven elusive.
“It is crucial that all major producers sit down to come up with a solution to this,” El-Badri, said at the Chatham House conference.
He added that as stockpiles in the Organisation for Economic Cooperation and Development (OECD) countries rose to more than 260 million barrels above the five-year average at the end of 2015, he believes that the market may start to rebalance itself this year as demand grows.
In an interview with state news agency Tass, Leonid Fedun, vice president of Moscow-based oil company Lukoil PJSC, said that Russia, not a member of Opec, could work with the body on reducing supply if a political decision was taken to cooperate.
“Pumping record volumes is not the best way to improve economics,” he pointed out.
The spectre of looming Iranian exports has Brent crude, the global benchmark, down about 16% this year as volatility in global markets adds to concern over brimming stockpiles.
The slump in prices is putting future investment in new oil supply at risk, according to El-Badri.
He stressed however, that there are signs that supply and demand will start to come back into balance this year.
Global demand is forecast to increase by about 1.3 million barrels a day while non-Opec supply is expected to contract by about 660,000 a day, he said.
