DUBAI: A prestigious Saudi Arabian energy think-tank has called for global co-operation to solve the crisis in global oil markets.
The King Abdullah Petroleum Studies and Research Center (KAPSARC) said that the “unprecedented disruption” of recent weeks on the world’s energy markets required “greater international co-operation with the Organization of the Petroleum Exporting Countries (OPEC).”
In a paper entitled “The world needs OPEC, but OPEC can’t go it alone,” the center argued that such co-operation was “the only short-term resolution to the current oil market crisis.”
The study comes amid moves in the international energy community for some form of combined approach by the three big producers — Saudi Arabia, the US and Russia — to stabilize markets.
In recent weeks there has been unprecedented energy volatility which has seen the price of crude fall by half on international markets amid record drops in demand for crude as national economies shut down because of restrictions to combat the coronavirus outbreak.
Energy experts have estimated that global demand for oil has fallen by at least 20 percent in the past month, and that storage facilities around the world are rapidly filling with crude.
Some big producers in the US are believed to be considering shutting oil facilities as prices in local markets reach “negative” levels, meaning that the oil companies pay customers to take crude away.
The crisis began earlier this month when Saudi Arabia and Russia — the two leaders of the OPEC+ alliance of OPEC members and other producers — failed to agree new output restrictions at a meeting in Vienna.
Saudi Arabia responded by announcing big new production targets, with capacity set to reach 12.3 million barrels per day next month, and significant discounts to customers around the world. Russia and several other big producers in the UAE, Iraq and Nigeria also said they would be lifting their crude output.
“The result of no-deal was another blow to the market sentiment, which was already turning bearish in the face of the growing COVID-19 outbreak. Oil market volatility is now at an all-time high, with the turmoil in the global
financial system further exacerbating the situation and making it more difficult for OPEC and supporting countries to stabilize the market,” KAPSARC said.