MUSCAT, SEPT 3 – Dr Mohammed bin Hamad al Rumhy, Minister of Oil & Gas, has said he is optimistic that international oil prices will remain within the $70-$80 per barrel range over the rest of the year, notwithstanding concerns stemming from geo-political tensions, looming trade wars, and the threat of sanctions by the United States against Iran. Dr Al Rumhy offered the assessment while taking part in a Ministerial Panel Discussion held during the opening of the World Heavy Oil Congress & Exhibition at the Oman Convention & Exhibition Centre here yesterday. He was joined on the panel by Shaikh Mohammed bin Khalifa al Khalifa, Minister of Oil — Kingdom of Bahrain.
“I think oil prices will stay between 70 and 80 dollars per barrel,” said the Minister of Oil & Gas. “I don’t think the 80s level will be touched this year, unless there is a major problem in the world.” He stressed in this regard the need for producing countries to ensure stability in supply and demand aimed at achieving a price range that is “fair” to producers and consumers alike. But he acknowledged “threats” on both the supply and demand side of the equation that could potentially impact international oil prices. Any uptick in prices, speculated in some “scenarios” to rise to $90 per barrel, is more of a “threat” to the market, than any “opportunity” for producers to make a windfall, Dr Al Rumhy noted.
“We are trying to sustain prices in the 70-dollars range, but there are dangers…,” the minister said. One such peril, which became evident in the latest deliberations of the Opec — non-Opec grouping of countries that have pledged to curtail production, is linked to potential supply-side challenges being faced by some producers. “When we reviewed the production levels, — we saw that some members of the Opec and non-Opec group were struggling to keep to the agreed quotas, and the reality is that production in many countries — Mexico for example — is declining very fast. Nigeria is another example of countries that are struggling to meet what they can produce.”
In his remarks, Dr Al Rumhy said the threat of declining production being seen in some countries was partly attributable to a lack of adequate investment by those producers in their energy industries. Such countries will face challenges in meeting their production objectives, he warned. The Sultanate, for its part, chose to “stay the course” in its upstream investment strategy from the outset of the oil price downturn in 2014, Dr Al Rumhy said, while crediting the Omani government, shareholders and the operators for their faith in this strategy.
Some Gulf producers, notably Saudi Arabia, United Arab Emirates and Kuwait, the minister said, have publically stated that they have the capacity to ramp up output to meet any supply shortfalls. Iraq too is a likely candidate to boost production, he noted.
Threats are also emerging on the demand side of the equation, Dr Al Rumhy said. “There is concern over a (looming) trade war and its impact on demand. There are threats both on the supply and demand sides. On the supply side, some are politically driven, apart from commercial and technical investment issues. There are also some political issues, such as sanctions on Iran — we are waiting to see what happens on November 4 (when US sanctions are expected to come into force — and if there is a reduction in supply in the market.”
Dr Al Rumhy also underlined the international energy industry’s pivotal role in meeting the burgeoning energy needs of the global economy. Sustainability concerns voiced by the UN General Assembly also have a bearing on energy security for the world, he said.
“To sustain economic development around the world, you must have sufficient energy. My concern has always been on how we can meet growing energy demand. We have a responsibility to mankind to supply that energy that is required for sustainability. Most often, we are accused of being polluters because the oil business is associated with fossil fuels, but actually we are the saviours of the global economy, whether we like it or not!”
Soaring energy demand growth requires that the world needs to continue to invest in the energy sector, said Dr Rumhy. Any collapse in oil prices, regardless of the factors involved, will be bad for the growth, he warned, while stressing the need for continued investment to help achieve a fair oil price.