Oil Price May Slump Further If Deal Fails
IRAN NEWS ECONOMIC DESK
TEHRAN – Iran’s former OPEC governor Mohammad Ali Khatibi believes if oil exporting countries do not respect their deal, the oil price may fall further.
Speaking to Tasnim News Agency, Khatibi welcomed recent agreement between oil exporting countries and OPEC+ for cutting their oil production in order to save the oil price from more fall.
He said that the positive point of recent meeting of the OPEC+ members was that all oil exporting countries realized that they have to manage the oil market and or else without managing the oil supply, it is impossible to stabilize the price.
He went on to say that due to recent weakened economic condition in the world, demand for oil has decreased and OPEC members wanted to cut their production by 1.5m barrels per day but non-OPEC members like Russia disagreed over cutting their products by half a million barrel per day.
He added that recent weak economies in the world have pushed the decline in oil demand and the market is currently witnessing at least 15m barrels production surplus. He added that it means 15m barrels per day are surplus and if it is not managed, nobody can expect oil price to improve.
Khatibi noted that decline in air and land transportation and lockdown in economic activities have badly affected the oil demand in the world and in order to balance the market, oil exporting countries have to cut their oil sales by 15m barrels per day.
He further said that in the OPEC+ meeting, some countries like Mexico disagreed over cutting their oil production but they finally agreed to cut their oil sales by 9.7m barrels per day. Major big industrial companies announced readiness to buy 3m barrels of oil per day for their strategic oil reserves.
Khatibi noted that there are some ambiguities over this agreement and for this reason oil market did not show any strong reaction to the agreement, adding that all should wait till May to see how this agreement becomes practical and if this cut in oil sale becomes practical, the market my bounce and the price will have uptrend move.
He reiterated that if the countries do not observe their obligations regarding the agreement, then oil market will see more slumps.
Khatibi said that if the countries reduce their daily oil sales by 19m barrels, then the market will face unprecedented cut in the oil market and it may help the oil price to bounce back and the oil price can be what the producers want.
