Dubai: Crude prices may remain low at least in the short term, Mohammad A. Al Sahlawi, a former member of advisory board, Supreme Economic Council of Saudi Arabia told Gulf News on Thursday.
“Next year, prices would be prevailing at around $20s. We don’t see a major growth in demand in emerging economies like China, and supplies are expected to increase from many countries especially Iran, US,” said Al Sahlawi, who is currently a professor of economics, college of industrial management, King Fahd University of Petroleum and Minerals in Riyadh. “So there is less demand, more supplies, so prices would be at lower level.” He was speaking on sidelines of a financial markets conference in Dubai.
Oil prices have crashed about 75 per cent since mid-2014, hit by a perfect storm of a supply glut, weak demand, a slowing global economy and a strong dollar.
On Tursday Brent traded at $27.88 per barrel, a far cry from the $147 struck in early July 2008.
Asked when he expected a recovery in prices, Al Sahlawi said, “not very soon, we may see a recovery in 2-3 years.” Oil prices would be low range in the coming years — may be in the range of $20-30s, he added without giving any forecasts.
Al Sahlawi said he does not expect much impact from Iranian supplies, but Saudi’s output is in the range to maintain its market share.
Despite the huge slump in oil prices over the past 18 months, the IEA (International Energy Agency) said earlier in the week that it is unlikely that Saudi production will fall below 10 million bpd (barrels per day) in the coming months.
Saudi Arabia has produced more than 10 million barrels per day bpd for ten consecutive months, pushing its average output at the end of 2015 to a record 10.17 million bpd.
The Organisation of the Petroleum Exporting Countries (Opec) is still pumping close to record amounts despite tumbling oil prices, and to add to the supply glut, another 400,000 bpd is expected to come on board from Iran, the Opec’s fifth largest producer.
However, in a report earlier in the week, Opec did not expect a substantial recovery in demand of its oil even as it forecast a steeper decline in non-Opec members output. Supply outside Opec would decline by 660,000 bpd in 2016, led by the US.
“The analysis indicates that 2016 will be a supply-driven market. It will also be the year when the rebalancing process starts,” Opec said in its monthly report on January 18.