By: O. Safitrie *)
After plummeting for almost two quarters, oil prices start stabilizing at around $60 per barrel and are expected to firm up.
“None of us know the future. Once the conspiracy theories lost their traction, serious commentators went back to fundamentals and the price started to stabilize around the $60 mark seen in the last few weeks,” An adviser to Saudi oil minister, Ibrahim al-Muhanna, was commenting at an energy conference in Doha on Sunday (15/3).
He also believes that demand will be stronger and prices will firm as Saudi Arabia will remain committed to a stable OIL market and stable oil prices. He further suggested that the drop in oil prices was not caused by market fundamentals but because of expectations and speculation.
Oil prices started falling sharply in September 2014 since the supplies exceeded the demands during late 2014. Due to this declining prices, many expected that OPEC members will cut their production to normalize the prices. But at its big meeting last November, such decision did not come up. Saudi Arabia refused to cut production and fight for market share.
Regarding this action, Muhanna said that before the November OPEC meeting, Saudi Arabia met with Russia, Mexico and Venezuela and none agreed to cut the production.
The oil supply has been a moot point for decades. The forecasts for the supply side are complex and controversial. US success with the shale oil is indeed a swing factor, but the future of whether there will be oversupplies remains uncertain. On one hand, OPEC believes that the oversupply amounting to as much as 1.5 million barrels per day will soon meet the demand as oil demand will rise and U.S. oil production growth slows. On the other hand, global oil oversupply may persist due to weakening economies, the use of nuclear to replace oil especially by Iran, US technology to extract non-conventional oil, and new efficiency measures.
*) The Author Is Singapore Contributor
