The decline in global crude oil prices may not abate until 2017 as the oil market is expected to rebalance within two years, the Secretary-General of the Organisation of Petroleum Exporting Countries (OPEC), Abdalla el-Badri, has said.
Badri, who spoke in London on Tuesday, was said to have expressed concern about the impact of low oil prices on investment and the consequences for future supply, but insisted that rebalancing the world oil markets was the responsibility of all producers and not a burden to be borne by OPEC alone.
He was quoted as predicting that oil prices would rise from current six-year lows of below $50 per barrel in the next few months, although he did not say how much improvement he expected.
“We have an overhang of 200 million [barrels] in the market. All of us should work together, OPEC and non-OPEC…all of us have to work together to see how we can get rid of this 200 million barrel overhang,” Badri told the annual Oil & Money conference in London.
“I’m really disturbed,” he said, referring to the wave of investment cuts announced by oil companies this year in response to the price plunge. “You will see the result. This means less supply and higher prices in the future.”
Talking to reporters later, Badri said overall global investment in oil could drop by $130bn this year from $650bn in 2014.
Badri also appeared to offer some comfort to those OPEC members that had been unhappy about the group’s current laissez-faire strategy of allowing prices to fall to levels that could force high-cost non-OPEC production out of the market.
“This will take a year, maybe a year and a half,” he said.
He noted that non-OPEC supply growth was slowing and was expected to be “zero” next year, while the call on OPEC crude was rising.
“So, we see that there is an improvement in the market,” he said, “but how much the price will improve we don’t know.”
Badri told reporters he expected Iran’s full return to the market to be discussed at OPEC’s next meeting on December 4 in Vienna.
Iran has said it expects to boost its crude exports by one million barrels per day within six months of the lifting of sanctions.
Badri was asked whether any talks were planned between OPEC and a number of independent producers.
He said there had been a meeting of technical experts in May and that he suggested October 21 for a follow-up meeting, again at expert level.
A date had still to be set, he said, emphasising that this meeting would not be at the ministerial level.
Oil prices have almost halved in the last year on oversupply in a drop that deepened after OPEC in 2014 changed strategy to protect market share against higher-cost producers, rather than cut output to prop up prices as it had done in the past.
“This situation may not stay long, more than two years,” the OPEC chief said in response to a question on how long the market would take to rebalance.
OPEC expects global demand for its crude, under pressure in recent years because of rising supplies from outside the group, to rise to 30.3 million barrels per day in 2016, about one million bpd more than in 2015.
“We will see the effect of the cut on production,” Badri said. “This will mean less supply in the near future.”
“We are seeing now a low price. After a few months, we will not see this. We will see a higher price again.”