Abu Dhabi: Fluctuating oil prices are likely to remain for the foreseeable future as the oil market adapts and balances itself to the continued drilling of shale oil, that was the opinion of former high ranking Opec delegates who took part on a round table discussion in Abu Dhabi on Thursday.
Hosted by New York University Abu Dhabi, the panellists included Abdullah Al Attiya, former Qatari deputy prime minister and minister of energy, Ramzi Salman, former Opec deputy secretary general, and Majid al Moneef, former Opec governor, Saudi Arabia.
Key to the discussion was the future of the oil market and how it would affect Opec member states, with the speakers all in agreement that previous oil prices of $100 (Dh367) per barrel were highly unlikely to ever return with the presence of shale oil in the market.
“History is repeating itself, what we had in the 70s with the development of non Opec oil which led to the collapse of the [oil] market from $42 at one time to crude oil being sold as low as $3 a barrel in 1986. Now we are having the shale oil,” said Salman.
“Shale oil and shale gas is setting the ceiling for a [market] price, anytime the [oil] prices start going up we see that some of the wells and facilities which were postponed when the prices dropped down are reactivated and they are back in production, and this will continue,” he added, explaining how increased oil prices would be pegged back.
Unstable market conditions
For his part, Al Attiya said that oil was currently competing against oil, which was creating the unstable market conditions.
“In the old days oil was competing with other sources such as coal, now it’s oil against oil.
“When the price goes down it goes very sharply, and it will take years to balance the market … Two weeks ago the price of oil went to $57 dollars … But I asked myself why did the oil price go up, there is no strong demand, and then suddenly the oil price went down [again], and the reason [it went down] was because the North Korean missile launch failed,” he added, pointing the oil market’s unpredictability.
Al Attiya did stress the need for Opec’s continued existence as a group, despite the organisation’s weakening influence over controlling the oil market.
“Maybe Opec has lost some of their influence … But in my opinion you need Opec.
“Opec can be a body to talk with all oil producers. Today at least there is an Opec organisation allocated in Vienna … And they can be a bridge to contact others, even today Opec has very good discussions with consumers and producers, and also producers and producers,” he added.
Al Attiyya pointed to the group’s agreed cutback on oil production between its member states and non Opec producers last year as a sign of the body’s usefulness.
“Even recently the agreement that Opec decided to cut [oil production] was participated by non Opec producers … So you need Opec as a bridge … Just at least to have direct contact with others to create stabilisation,” he said.
Speaking from a Saudi perspective, Al Moneef played down suggestions that decisions to restabilise the market were being made from a political angle.
“If [oil] production is cut [by Opec] they say you are interfering in market forces. If you increase production they say you are dropping prices and this is [about] market share and so on.
“We should read history the way the market is there, I am an economist … The prices of $100 plus [a barrel] was not sustainable, it will bring shale oil, [and] demand will be impacted … There is no conspiracy about it, everyone in the market knew the prices were not sustainable,” he added.