Global economy doomed to suffering even with oil prices staying above $80/bbl
Baku, Azerbaijan, Oct.29
By Leman Zeynalova – Trend:
Global economy will suffer even with oil prices staying above $80 per barrel, Charles Ellinas, CEO of Cyprus-based energy consultancy e-CNHC told Trend.
The expert said that in general, it is possible for oil prices to reach above $100 per barrel.
"US sanctions are having an impact on Iran oil exports at a time when demand has just exceeded 100 million barrels per day. However, China's economic downturn and its trade war with the US may slow down its oil consumption, impacting global demand," noted Ellinas.
He pointed out that based on what is happening with China, Iran's ability to maintain some exports, Russia's promise to increase production and US steadily increasing production, the shortfall should be largely covered.
"In addition Saudi Arabia has just reassured the markets that it can supply more crude oil quickly if needed, by as much as 1 to 2 million b/d. Coming today, despite the Khashoggi developments, hopefully any more revelations will not derail it," said the expert.
However, Ellinas believes it is likely that there will be some shortfall, so he expects Brent prices will stay above $80 per barrel.
"Even if there is no significant hike, with prices staying above $80 per barrel the global economy will suffer, particularly in Asia, India and China, where most growth is. China's economy was slowing down before this - it is not likely to get any better. But the biggest impact may be on India," he noted.
Speaking about the possibility of ceasing the OPEC deal, the expert said that it is very likely.
"I expect OPEC will reaffirm further easing of production curbs when it meets in December. But OPEC members having rediscovered strength in unity, they will maintain their cooperation and their control of production," said Ellinas.
Saudi Arabia’s Energy Minister Khalid A. Al-Falih earlier said that the country’s daily oil output for October stands at 10.7 million barrels. He noted that in the case of necessity, this figure can reach 12 million barrels per day.
The minister pointed out that the uncertainty with regard to world oil supply still continues. The sanctions to be imposed on Iran starting from Nov.4 and the supply cuts from some other countries also contribute to this uncertainly, according to Al-Falih. Therefore, the minister believes it is not ruled out that oil prices can surpass $100 per barrel in 2019.
Earlier, OPEC and several other non-OPEC producers reached an agreement to extend the production deal for a further nine months. This would shift the expiration date of the agreement from March to the end of 2018. The agreement is on the same terms as those agreed in November last year.
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