Oil prices will rebound rather than extend their decline to as low as $20 a barrel because a collapse since June isn’t merited by global supply and demand, OPEC’s Secretary-General said.
Producers outside the Organization of Petroleum Exporting Countries should be first to reduce their output amid a surplus that’s pushed crude below $50 a barrel, Abdalla El-Badri said in an interview with Bloomberg Television at the World Economic Forum in Davos, Switzerland on Wednesday. Iraq, OPEC’s fastest-growing supplier, said it needs to boost output to compensate for revenues eroded by the price slump.
“The price will not go to $20 or $25, I think the price will stay at where we are now,” El-Badri said. “We have seen this before -- prices coming down very fast and go up very slow. But prices will rebound.”
Oil slumped almost 60 percent since June as OPEC nations continued pumping amid the highest U.S. production in more than three decades. The 12-nation group’s decision on Nov. 27 to maintain output was based on economics, and wasn’t intended to target U.S. shale drillers, Russia or any other country, El-Badri said.
Brent slid 16 cents, or 0.3 percent, to $48.87 a barrel on the London-based ICE Futures Europe exchange at 12:28 p.m. Singapore time. West Texas Intermediate lost 33 cents to $47.45.
Non-OPEC nations, some of which require prices of $100 a barrel to sustain output, should be first to pull back as their production has expanded over the past decade while OPEC’s remained stable, El-Badri said. OPEC decided in November that, if it cut supply, rising non-OPEC output would have required it to make successive reductions through to 2016, he said.
Iraq, OPEC’s second-biggest member, has lost about 50 percent of its revenues because of the slump in oil and consequently needs to bolster output, Deputy Prime Minister Rowsch Nuri Shaways said Wednesday at the WEF in Davos.
“Because of the new challenges, especially the price of oil, Iraq has to try its best to raise it oil production and exports,” Shaways said.
An agreement last month between the country’s federal government and the semi-autonomous Kurdish region will boost exports by more than 550,000 barrels a day, he said. The nation is pumping at about 4 million barrels a day, already a record, Oil Minister Adel Abdul Mahdi said Jan. 19.
OPEC and non-OPEC producers must keep investing in new supplies despite the price plunge, El-Badri said. Without sufficient spending in additional capacity over the next five years, oil prices could rebound above $100 a barrel.
OPEC’s crude output rose by 80,000 barrels a day last month to 30.48 million as additional oil from Iraqi fields more than offset a collapse in Libyan production, the International Energy Agency said in its monthly market report Jan. 16.