Middle-east Arab News Opinion | Asharq Al-awsat

Oil prices could reach $200 per barrel: OPEC chief | ASHARQ AL-AWSAT English Archive 2005 -2017
Select Page
Media ID: 55340865
Caption:

OPEC Secretary General Abdallah El-Badri attends a session of the World Economic Forum (WEF) annual meeting on January 21, 2014, in Davos, Switzerland. (AFP Photo/Fabrice Coffrini)


OPEC Secretary General Abdallah El-Badri attends a session of the World Economic Forum (WEF) annual meeting on January 21, 2014, in Davos, Switzerland. (AFP Photo/Fabrice Coffrini)

OPEC Secretary General Abdallah El-Badri attends a session of the World Economic Forum (WEF) annual meeting on January 21, 2014, in Davos, Switzerland. (AFP Photo/Fabrice Coffrini)

Al-Khobar, Asharq Al-Awsat—Oil prices could rebound to 200 US dollars per barrel if investments in the oil sector dry up in light of current low prices, according to OPEC’s secretary general, Abdallah El-Badri.

Speaking to Bloomberg in London on Monday, Badri warned that new investment was needed in order to develop oil fields, with investments in the sector already falling and a number of projects canceled as current low prices continue to affect profit margins.

This echoed comments by Badri on Wednesday, when he told attendees at the World Economic Forum in Davos that current oil prices would not last as investment in oil production would drop 15 percent, or 100 billion dollars, this year compared to 2014.

Oil prices have fallen by more than 60 percent from last year, when they hovered around the 100 dollar mark. An oversupplied market—largely caused by the shale oil production boom in the US and low demand from China and the EU—caused prices to tumble during the second half of 2014.

Badri told Bloomberg the excess in supply currently stood at 1.5 million barrels per day (bpd) and that the market would eventually stabilize as a result of a shortage in supply and not due to demand going up. Plans by Iraq to raise production this year to 4 million bpd would not affect the market drastically by compounding the supply surplus, he said.

Financial and banking multinational Barclays, meanwhile, put the excess in supply in the market slightly lower, at 1.1 million bpd. In a report released on Monday it said prices would likely remain around their current range due to present market conditions, known as contango, where oil futures prices are above current spot prices, causing some buyers to store supplies to sell later at a higher price.

OPEC took the surprise decision in November of 2014 to keep its production levels at their current 30 million bpd. Observers were expecting the organization to cut production in order to stem the excess in supply and drive up prices, but OPEC said it wanted to allow the market to recover naturally.

OPEC, whose members enjoy lower production costs than other producers, is banking on production dropping from non-OPEC producers such as the US, where shale oil particularly is costly to drill. It hopes the low prices and, in turn, lower profits, will cause production to drop and investment to slow as revenues dry up.

But Badri also dismissed talk of a “price war” between OPEC and non-members, especially the US, telling Bloomberg OPEC was willing to hold talks with non-OPEC oil producers in order to balance the market. This echoes comments also made on Monday by Venezuelan President Nicolás Maduro during his visit to Saudi Arabia, when he said the organization was undertaking “serious diplomatic efforts” to coordinate with non-OPEC producers.

Prices for Brent crude are currently hovering in the 45–50 dollar region, but Badri said on Wednesday at Davos he did not expect them to fall further to the 20–25 dollar range as some analysts have predicted.