Sultan Al Mansouri, the Minister of Economy, expects oil to trade between US$80 and $100 a barrel this year as the crude market continues to be buffeted by volatility.
Brent Crude, the benchmark for oil sold into Europe, hit a 16-month low of $95.63 a barrel yesterday after falling for a fifth consecutive day on negative economic data out of China and the United States. Prices later recovered to trade at about $97.90 a barrel.
“My expectation is it will hover between $80 and $100 depending on the situation – it could be more than that,” Mr Al Mansouri said yesterday.
He did not specify which benchmark he was referring to, but said oil sales this year had averaged at about $112 a barrel, allowing for a GDP growth of 3 per cent. “As long as it hovers around $100, it is the right price,” said Mr Al Mansouri.
Oil traded on the New York Mercantile Exchange sold for about $83 a barrel yesterday. The Opec basket price, the average price of oil sold by the producers’ organisation, stood at more than $97 a barrel on Friday.
Both Brent and the Opec basket crashed through the $100 a barrel barrier at the end of last week, driven by the woes of the euro zone and a worsening global outlook.
The precipitous drop in the price of oil during the past week will mean a significant decline in oil revenues for the Gulf if current production levels are sustained, said Giyas Gokkent, the chief economist at the National Bank of Abu Dhabi.
“A $10 decline in the price of oil for the GCC as a whole can mean $60 billion of difference,” he said.
Prices shot up at the beginning of the year as tensions in the Gulf led to concerns over a closure of the Strait of Hormuz, the waterway that carries one fifth of global exports, and fears that sanctions on Iran would leave the market in short supply.
Since then Europe’s slump, with several countries back in recession, and increasing economic headwinds in Asia and the US reversed that pricing trend.
Declining inventories and the continued prospect of reduced Iranian exports have experts predicting oil prices will rally later in the year.