Fundamentals do not support recent fall in oil prices: H E Aufi

Muscat - 

Recent volatility in the global oil prices is not supported by basic fundamentals and other factors such as speculations could be responsible for the sharp decline in prices, according to a senior official of the Ministry of Oil and Gas.

Oil prices fell more than 30 per cent in past seven weeks and touched their lowest level in more than a year earlier this week as talks of surplus oil amidst lower than expected growth in demand, along with the relaxation given to some countries to buy Iranian crude hammered the prices.

Though all these developments put additional pressure on oil prices, industry officials believe that a sharp correction in prices is mainly due to speculation.

“I think the good news is that the fundamentals are not supporting the fall in prices,” H E Salim bin Nasser al Aufi, Undersecretary of the Ministry of Oil and Gas said on Tuesday. “If fundamentals are not supporting, then there must be something else,” he added.

H E Aufi was speaking to reporters on the sidelines of the 6th Oman Energy Forum. The event was organised by the research firm - Gulf Intelligence under the theme ‘Oman Energy Master Plan 2040’. The Forum was attended by more than 200 officials from the oil and gas industry.

On oil price outlook, H E Aufi said, “I think it is too early to say what is actually driving the prices.” Oman has maintained that it expects oil prices to remain between US$70-80 per barrel this year. However, the Brent crude price touched as low as US$58 per barrel on Monday.

H E Aufi further said that the oil prices were under pressure from increased US production and also due to reports about the rise in inventory level along with other factors such as slight reduction in demand outlook and higher production by some countries.

“All of these put pressure on the prices but probably the most fundamental one is traders catching in very quickly and grabbing the high prices,” he said.

H E Aufi added that he doesn’t expect the projected oil price, which remains the basis of calculating budget earnings and expenditures, for next year’s budget estimate to be revised upwardly.

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