Low Oil Prices Here to Stay?

Low Oil Prices Here to Stay?
Low Oil Prices Here to Stay?

Crude oil price cuts are not temporary, but rather a “planned policy that will continue for some time,” deputy oil minister said Sunday, ISNA reported.

“The drop in oil prices in recent months is political, not economic,” Mansour Moazzami said, adding that the ministry is looking at different approaches to try and regulate the global oil market.

On hesitation on the part of Iran to call for an emergency OPEC meeting, Moazzami said, “We will ask for a meeting only when we are clear on our vision,” emphasizing that negotiation is an effective tool to regulate market and curb further price drops.

The global price of oil had been relatively stable for nearly four years, averaging $110 per barrel. Increased production in the US, Canada, Iraq and elsewhere have made up for the declining supplies by nations such as Iran and Libya, and helped meet the rising global demand.

However, Brent crude fell from $115.71 a barrel on June 19 to $82.60 a barrel on Oct. 16, the lowest price in almost four years.

The delicate balance has been upended by a weaker global economy. Demand is slowing while production, particularly in the US, continues to surge.

Despite Moazzami’s assertion, chief executive of Saudi Basic Industries Corp Mohamed Al-Mady claimed on Sunday that the recent decline in global oil prices will prove temporary even if it lasts a year or so, since population growth will ultimately bring higher consumption and prices.

Al-Mady was speaking to reporters after the company, one of the world’s largest petrochemicals groups and the Persian Gulf’s largest listed company, reported a 4.5 percent drop in third-quarter net income, missing analysts’ forecasts.

According to Moazzami, oil exports in the March-September period were 5 percent more than estimates, while gas production saw a 60 million ton increase in the said period compared to that of last year.

The ministry aims to add another 740,000 barrels to daily crude production in the near future, totaling production to 4.3 million barrels per day. He added that the ministry is trying to diversify export locations.

Gas production is also expected to reach 100 million cubic meters by the end of the present Iranian calendar year (ending March 2015).

“We will operate with more composure this year compared to the past three years,” he said without elaboration.