Oil mar­ket to re­bal­ance it­self, prices to rise: Sheikh Mo­ham­mad

Kuwait Times - - LOCAL -

DOHA: Even though oil prices might stay low for long, yet de­mand will very likely in­crease to sup­port a re­turn to higher prices; hence, “mar­ket will re­bal­ance it­self and prices will rise,” Min­is­ter of State for Cabi­net Af­fairs and Act­ing Min­is­ter of Elec­tric­ity and Wa­ter Sheikh Mo­ham­mad Ab­dul­lah Al-Mubarak Al-Sabah re­as­sured yes­ter­day.

“Oil prices will surge again yet the tim­ing is not cer­tain,” the min­is­ter said in his speech at the sixth Asian En­ergy Min­is­te­rial Round-Ta­ble, held in Qatar. “The world is now re-ad­just­ing to an en­vi­ron­ment where lower oil prices pre­vail, and there is great com­pe­ti­tion from other in­dus­tries.”

He pointed out that over the past year or so, oil prices have dropped by nearly 60 per­cent and have now hit their low­est lev­els since early 2009, be­cause of an over sup­plied mar­ket co­in­cid­ing with signs of eco­nomic slow­down around the world, most no­tably in some ma­jor Asian economies.

This cur­rent lower oil price en­vi­ron­ment, the min­is­ter ex­plained, has been caused mostly by the sig­nif­i­cant sup­ply growth from un­con­ven­tional, ex­pen­sive oil be­cause of tech­no­log­i­cal ad­vance­ment. “Pro­duc­tion of ex­pen­sive un­con­ven­tional oil made eco­nomic sense only be­cause of a pe­riod ever of sus­tained high oil prices from 2010 un­til mid-2014. Oil prices are also greatly in­flu­enced by ex­pec­ta­tions of de­mand growth es­pe­cially in emerg­ing mar­kets.”

He added that Volatil­ity in eq­uity and for­eign ex­change mar­kets in Asia have in­creased un­cer­tainty about the eco­nomic growth prospects of many de­vel­op­ing na­tions in Asia, af­fect­ing the price of crude oil.

Eq­uity mar­kets

Eq­uity mar­kets around the world, par­tic­u­larly those in other Asian coun­tries, also de­clined, re­flect­ing mar­ket sen­ti­ment that China’s eco­nomic growth may slow down and af­fect pro­duc­ers of en­ergy and non-en­ergy com­modi­ties who are re­liant on de­mand growth in China.

Oil price col­lapses in 1981-1986 and 2008-2009 are the only ana­logues for the present oil price sit­u­a­tion. So far, the cur­rent price col­lapse seems more sim­i­lar to 19811986 than to 2008-2009, he pointed out. “Even­tu­ally the mar­ket will de­ter­mine ac­cept­able and com­fort­able prices for both pro­duc­ers and con­sumers,” he said, adding that the mar­ket al­ready has shown a shift as crude oil pro­duc­tion growth from non-OPEC is slow­ing down.

US tight oil pro­duc­tion has started to grad­u­ally fall from July 2015, af­ter rig counts fell sig­nif­i­cantly due to sus­tained lower oil prices. On the other hand, de­mand has been re­mark­ably strong com­pared to 2014 lev­els, and that would cer­tainly help mar­ket to re­bal­ance.

“Asian and Mid­dle East coun­tries rep­re­sent a large por­tion of the world’s pop­u­la­tion, the bulk of the world’s oil and gas re­serves and the greater part of the surg­ing global en­ergy de­mand ex­pected in the decades ahead.”

Over two-thirds of growth in de­vel­op­ing coun­tries will come from de­vel­op­ing Asia, with China see­ing the largest ex­pan­sion, fol­lowed by In­dia. “This em­pha­sizes the im­por­tance of co­op­er­a­tion and di­a­logue in or­der to achieve sta­bil­ity of prices and en­ergy mar­kets and pro­vide suf­fi­cient oil sup­plies, he noted. “The in­ter­de­pen­dence be­tween Asia and Mid­dle East is ob­vi­ous and must trans­form into a strate­gic part­ner­ship be­tween the two re­gions for their long term mu­tual ben­e­fits.”

This in­ter­de­pen­dence should be sup­ported by trans­parency and con­tin­ued open di­a­logue, an ex­change of ex­pe­ri­ences in the field of en­ergy ef­fi­ciency, de­vel­op­ment of al­ter­na­tive and re­new­able sources of en­ergy as well as de­vel­op­ment of qual­i­fied hu­man resources.

Fur­ther­more, it is es­sen­tial to stim­u­late trade with­out hur­dles in or­der to en­sure the sta­ble flow of oil and gas from pro­duc­ing re­gions of the world to con­sum­ing re­gions like Asia. En­ergy ef­fi­ciency is largely rec­og­nized as the most mea­sur­able and cost ef­fec­tive man­ner to meet grow­ing en­ergy de­mands whilst con­tribut­ing to cli­mate change mit­i­ga­tion and eco­nomic growth. De­spite the un­cer­tain­ties and chal­lenges fac­ing the en­ergy sec­tor, we all agree that our main ob­jec­tive must fo­cus on pro­vid­ing a sta­ble and sus­tain­able en­ergy fu­ture for the next gen­er­a­tions.

DOHA: Min­is­ter of State for Cabi­net Af­fairs and Act­ing Min­is­ter of Elec­tric­ity and Wa­ter Sheikh Mo­ham­mad Al-Ab­dul­lah Al-Sabah at­tends the sixth Asian En­ergy Min­is­te­rial Round-Ta­ble.

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