New Delhi, Dec 15 (IANS) The current free fall in global oil prices where the Indian basket of crude oils has plunged below $35 a barrel will not continue, the Organisation of Petroleum Exporting Countries (OPEC) said on Tuesday.
“The current price situation will not continue… there will be less supply coming to the market. Over the past year, there has been a reduction of $130 billion in investments for fresh production,” OPEC secretary general Abdalla Salem el-Badri told reporters here.
“Low prices will result in supplies coming down by 400,000 barrels a day by 2016,” Badri said, following the first ever India-OPEC institutional dialogue here that was decided in June at the OPEC’s Vienna meeting in which India participated.
Petroleum Minister Dharmendra Pradhan said that India has conveyed to OPEC “its need for reasonable and responsible pricing of oil and this is an ongoing dialogue”.
“By not cutting production and keeping prices low, OPEC is helping countries like India,” he added.
Prices have fallen over 60 percent in a little over a year from levels of well over $100 a barrel, provoked by the slowdown in China and other emerging market economies and the end of sanctions against Iran.
Noting that OPEC said on Tuesday that India is the only emerging market where demand is growing, Pradhan said that in the period leading up to 2040, India would “have the highest GDP growth rate in the world”.
Assuring that India’s views would be taken into consideration while preparing OPEC’s energy outlook review, Al Badri said that as regards prices, the cartel does not maintain a target.
“We look for a fair price, one that assures a reasonable income for producers, which can then be invested in production,” he said.
The Indian basket, comprising 73 percent sour-grade Dubai and Oman crudes, and the balance in sweet-grade Brent, plunged to $34.39 on Monday for a barrel of nearly 160 litres, as per data compiled by the state-run Petroleum Planning and Analysis Cell.
Oil prices have been under pressure for several months due to concerns over oversupply, but the slump has deepened recently.
Crude oil production has remained robust despite the large drop in prices in the last year, as US producers continue to cut costs and OPEC members keep producing at full tilt.
Meanwhile, Moody’s on Tuesday maintained its negative outlook on the global oil and gas sector saying a prolonged period of oversupply will keep oil prices lower for longer and continue to pressure the industry in 2016.
“Low commodities prices and uncertainty about the pace of their recovery will continue to limit exploration and production activity in 2016, leading to spending cuts, stalled production growth and volume declines,” Moody’s managing director Steve Wood said in a statement from Toronto.
“And these cuts will in turn lead to lower revenue for drilling and oilfield services companies, which will face persistent equipment overcapacity and need to minimize capital expenditures just to operate near break-even cost levels,” he added.
The ratings agency, however, maintained its stable outlook on the refining and marketing and midstream subsectors.
Other analysts, however, felt factors supporting a more positive outlook range from higher car sales to heightened security and political risks in some oil-producing countries and the plight of debt-stressed shale companies.