Oil chief : Prices primed for a recovery / Opec supply cut could stabilise market
Written by Writer on Saturday, October 25th, 2008
Oil chief: Prices primed for a recovery
Opec supply cut could stabilise market
NAREERAT WIRIYAPONG
World oil prices could drop as low as $50 a barrel on fear of the global slowdown but will bounce back quickly to an equilibrium around $80-100 a barrel, an energy expert said yesterday. Johannes Benigni, managing director of Vienna-based JBC Energy, also recommended that the Thai government abandon its oil subsidies and allow petrol prices to reflect actual costs during the cheap oil period.
World oil prices plunged to the lowest points for more than 17 months yesterday, despite news that the Organization of Petroleum Exporting Countries (Opec) will cut oil output by 1.5 million barrels a day. Brent North Sea crude for December delivery slumped on Friday to $61.08 per barrel.
The 12-member Opec met in Vienna yesterday _ well ahead of a previously scheduled session on Nov 18 _ with the aim of preventing a further slide in price.
”Now the price is collapsing due mainly to lack of credibility. The risk now is very high that prices will fall to $50 due to the global recession,” Mr Benigni, who is also an adviser to Opec, told the Global Oil Market Outlook forum held by PTT Plc yesterday.
But he said oil prices would not stay low for long because marginal output from high-cost non-Opec producers will not last. Meanwhile, international oil companies are having difficulty finding new resources due to high-tax regimes in countries such as Russia.
”If Opec can convince the market it will cut production by two million barrels starting in December, prices will be back to $80 a barrel,” he said.
Mr Benigni also described outlooks for downstream petroleum products as poor _ especially for petrol as demand collapses in the US, which represents over 40% of global consumption.
US petrol demand is now projected at 6.7 million barrels a day in 2020, down sharply from the peak of 8.9 million in 2007.
Markets for other refined products are also weak, except for fuel-oil, which is used in power generation. Some Middle East countries may not secure enough natural gas and would rely on fuel-oil for generating electricity.
Oil refinery futures look gloomier. Some refineries must be closed or cut capacity due to a glut in supply, he said.
”Now, power is in the hands of integrated oil companies like PTT because they don’t have to trade much with outsiders when the market has become difficult and credit is questionable,” said Mr Benigni.
He also suggested opportunities have arisen for PTT to buy oil assets, which are getting cheaper although the sector always has long-term demand growth.
Surong Bulakul, senior executive vice-president of PTT, said the group’s refineries had to seek export markets to balance supply _ especially for petrol, which accounts for 20% of total output.
”We are exploring opportunities to acquire strategic petroleum-related assets overseas,” said Mr Surong.
Bangkok Post
Saturday October 25, 2008
