5.12 PM Thursday, 22 February 2024
  • City Fajr Shuruq Duhr Asr Magrib Isha
  • Dubai 05:31 06:45 12:35 15:51 18:20 19:34
22 February 2024

Oil prices to remain low: expert

Adnoc says reducing the price of gasoline is currently not on the agenda. (AP)

By Staff

Oil prices will remain low for the time being after losing more than half their level over the past few months as oil heavyweight Saudi Arabia is unlikely to act, according to a prominent Arab energy expert.

While the 12-nation OPEC abandoned its policy of controlling prices long time ago, it has committed a major mistake by “forgetting that high prices inevitably encourage new sources of supply,” said Ali Aissaoui, senior consultant at the Saudi-based Arab Petroleum Investment Corp (Apicorp), an affiliate of the Kuwaiti-based OAPEC.

“The current crisis is deeper than first thought and therefore might remain immune to remedy for a while,” Aissaoui, an Algerian, said in a paper presented at the meeting of the Arab Energy Club in Bahrain this week.

“In this regard, Saudi Arabia is unlikely to change its current passive strategy of leaving the market to its own device; not until high-cost producers (chief of which American shale oil producers) respond to low oil prices by scaling back their supply and state producers both within and outside OPEC seriously rethink the framework and substance of their co-operative policies,” he said in the paper sent to Emirates 24/7.

Aissaoui said he believes that a significant and sustained production cut will be needed in order to have any chance of restoring market stability at acceptable price levels.

Recalling past oil price levels, he said prices have an “episodic” nature and that the passage from one episode to another is due to some crisis or other.

“We have had the $2 per barrel episode in the post of the 1950s and 1960s, the OPEC $11 episode in 1974-79, the $18 of the late 1980s and the 1990s, the $25 episode of the early 2000s, then the most recent episode of $100 plus per barrel,” he said.

He noted that each of these episodes was punctuated by major discontinuities, including dramatic changes in investment policies: the 1973 Arab-Israeli war and Arab oil embargo, the 1979 Iranian revolution, the 1985 Saudi oil net back pricing, the 1977 Asian crisis and the 2008 Global Financial crisis.

“How long and how deep will today’s discontinuity, which involves a disruptive supply shock, evolves until the next oil price episode is anyone’s guess,” he said.

 “As far as OPEC is concerned, members of the Club concluded that its policies should be adapted to the lessons learned and changing challenges. In so doing, OPEC policymakers should pay attention to a number of issues including inventories, investment, market share, OPEC cohesion, as well as learning the skills needed to communicate to an increasingly complex and sophisticated market.”