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Oil price fall not a threat for now – OPEC

By on May 30, 2017

The fall of crude oil price in the international market after the decision by the Organisation of Petroleum Exporting Countries (OPEC) to continue with its production cut till March next year is not a major concern for now, the Secretary General of the group, Mohammed Sanusi Barkindo has said.

Speaking to newsmen after the agreement in Vienna, Barkindo said the target by the group is to rebalance the crude oil stock globally and that can only be achieved slowly and steady.

“Volatility in price, before, during and after the OPEC meetings is almost routine, because traders taking position on both side, in anticipation of decision by OPEC and  as you know they use the media in order to advocate their positions”, he said.

“The conference decided to extend the commitments by 9 months, because the first commitment will end in June, and from the figures we received so far from January to April, we are yet to achieve our target of bringing down stock inventories that has been in an unsustainable levels for the past three years as a result of the impact of the severe downturn of the current oil market circle”, he added.

“We have been witnessing steady drawdown of the stocks but not at the pace that we expected and therefore we thought we needed more time, more patience to achieve this market balance.”

He said members were all united on one cause as stock has never been at high level in the history of this industry as it was in the last two to three years.

He said: “At one point last year, we had petroleum stocks around the world over 380m above the five year industry average. We have storage both on shore and offshore filled up and in this equation, stock is the key veritable in maintaining stability, so we were united on that front, in order to balance it, we need to balance the market.”

According to him, that was why for the last six months OPEC keeps withdrawing 1.8 million barrels a day, “now the impact of that, is that we were able to bring down stocks from about 380m  level above five year industry  average to now around 250m, but we can still see, that we are far behind our target, hence,  the need to extend the decision not only for six month as provided in the declaration in December, we have to amend it to now 9 month.”

He also said traders had taken huge amount of money in the market either on long or short term, and “because of this high level of stocks in the market is very sensitive.”

He further said the slid in oil price after the meetings was caused by speculations in the market that OPEC was going to deepen the adjustments with higher numbers beyond the 1.8m.

“I think the market anticipated that but we do not react to market conditions, we look at the fundamentals, we are very satisfied with fundamentals.

“Supply is coming down, our conformity level is over 100 percent for both OPEC and NON-OPEC, this has never happened before, going forward our projections are that demand will grow by about two million barrels a day, so all we needed to do instead of deepening the cut was to extend the decision by nine months not six and to increase our commitments.”

 

[Daily Trust]