Former Minister of Petroleum and Mineral Resources Osama Kamal
Former Egyptian petroleum minister Osama Kamal said that the current global oil price free fall is temporary and there will be a shift as of Wednesday morning.
Speaking to Ahram Online, Kamal said that as of Wednesday the new oil prices for June will be announced, which are expected to be at $45 a barrel.
The former minister said that, with the implementing of a production reduction recently agreed by OPEC and non-OPEC producers, daily oil production is expected to decline by more than 20 million barrels.
In addition, a number of countries that have been badly hit by the coronavirus outbreak have announced that they will ease their lockdown measures as of May, including the US and Germany.
These factors, according to Kamal, are anticipated to play a role in pushing oil prices up to $35 and $40 per barrel by the end of June, and to hit $60 by the end of 2020, returning to the normal level before the oil price war that began last month.
Kamal told Ahram Online that Egypt is removed from any negative impacts of the situation, especially as the country used to import between 35 to 40 percent of its oil needs, but has since become self-sufficient due to discoveries that have boosted production and resulted in a surplus.
Kamal added that Brent crude, West Texas Intermediate, and Arab Gulf crude are the main sources for setting oil prices globally, according to supply and demand, stressing that the collapse in West Texas prices will not affect oil, electricity, and power prices in Egypt at all.
Egypt has a total oil and diesel surplus of 60,000 tonnes, which was shipped on Monday as exports, an unprecedented action that has not taken place in years.
Kamal stated that the global oil price collapse has occurred because US infrastructure cannot absorb the increase in crude stock, and traders are therefore compelled to dispose of stacked oil to avoid paying extra costs.
“In addition, global daily oil production has reached 150 million barrels, while consumption does not exceed 90 million barrels a day. That’s why the production process has witnessed a surge, which led to a gradual price reduction from $70 per barrel in September and October to $30 a barrel during the COVID-19 outbreak crisis,” said Kamal.
He added that, with the outbreak, oil consumption has decreased from 90 million barrels per day to 68 million barrels per day, helping torpedo oil prices.
An oil price war was sparked in March by Saudi Arabia, to punish Russia for its refusal to reduce oil production in order to keep prices at a moderate level.
The struggle was followed by the COVID-19 outbreak, which dealt a crushing blow to oil supply and demand due to lockdown measures and social distancing.
The drop in prices occurred despite OPEC and other oil-producing countries approving on 12 April a cut to production, a move supported by Russia, Saudi Arabia and the US to stabilise both oil prices and global financial markets, which had taken a hit.
On Monday, US oil markets dropped below zero for the first time in market history, reaching -$4.29 a barrel on Tuesday.