BAGHDAD: A governor on the board of the Organization of Petroleum Exporting Countries (OPEC) yesterday said it will take at least two years for crude prices to recover to between $70 and $75 a barrel. The official’s gloomy forecast came as oil slipped below $34 a barrel as worries over the health of the global economy and forecasts for a hefty fall in energy demand weighed on sentiment.
Falah Al-Amiri, who is also head of Iraq’s State Oil Marketing Organization (SOMO), warned that the sudden downturn in the Chinese economy has compounded an already bleak situation with US and European demand weakening.
“We need at least another two years to make the price of oil 70 to 75 dollars,” Al-Amiri told AFP in an interview. “Growth in China was supposed to be nine percent, now they have reduced that to four percent. America and all of Europe is in recession, especially Britain. The picture is gloomy ... the system is collapsing,” he said.
Al-Amiri said it is “for the ministers at OPEC to decide” on March 15 if production should be cut, but it is his personal view that prices will probably rise in the latter half of 2009.
“In the first part of this year the price will be less than 50 dollars, and in the second part it may be more than 50 but less than 55,” he said. “In the next year probably a little bit more, up five or 10 dollars,” Al-Amiri added
Iraq’s Oil Minister Hussein Al-Shahristani last weekend predicted that OPEC will cut production in March and said the price of a barrel of crude should not be less than $70.
Iraq has the world’s third-largest proven oil reserves after Saudi Arabia and Iran and money from oil sales is its main source of revenue, but it is desperate for more income in order to rebuild its devastated economy.
Yesterday, oil prices slid closer to a new multiyear low because of growing doubts that the $789 billion stimulus package will reinvigorate the US economy and demand for energy.
Light, sweet crude for March delivery tumbled $1.96, more than 5 percent, to settle at $33.98 a barrel on the New York Mercantile Exchange. The contract has closed lower every day this week after a government report showed that crude inventories jumped much more than expected.
Traders said the short-term direction of the market was being dominated by movements in stock markets, which opened lower in Europe yesterday, and the dollar, which rose against a basket of major currencies.
“Overall the market appears to be slipping,” said a dealer at a large London brokerage. “Oil demand is falling and a lot of attention is being paid to macroeconomic data.”