The global oil prices – crashed into negative territory for the first time in history on Monday – is temporary, former Egyptian oil minister Osama Kamal told Ahram Online on Tuesday.
Kamal said that as of Wednesday the new oil prices for June will be announced, which are likely to trade at $45 a barrel.
He referred to two factors that are set to play a role in pushing oil prices up to $35 and $40 per barrel by the end of June, and to trade at $60 by the end of 2020, returning to the normal level before price war.
One of these factors is, Kamal said, when bringing into effect the oil production cut recently agreed by OPEC and its allies OPEC+, the daily oil production is expected to fall by more than 20 million barrels.
Another factor is that a number of countries that have been badly stricken by the coronavirus pandemic announced their plans to ease their lockdown measures – including curb in movements – as of May, including the U.S. and Germany, he added.
Kamal said Egypt is away from any negative impact of the crash situation, as the country used to import between 35 to 40 percent of its oil needs, but it has now become self-sufficient due to discoveries, resulting in boosting its boosted production and having a surplus.
He added that Brent Crude, West Texas Intermediate (WTI), and Arab Gulf Crude are the main sources for setting oil prices globally, according to supply and demand. Therefore, the collapse in WTI 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, according to the former minister.
Kamal said the global oil price collapse occurred because the U.S. 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.
With the outbreak, oil consumption has dropped from 90 million barrels per day to 68 million barrels per day, helping torpedo oil prices, he added.
In March, an oil price war was sparked by Saudi Arabia, to punish Russia for its refusal to cut oil production in order to keep prices at a moderate level.
This war was followed by the pandemic, giving a crushing blow to oil supply and demand due to lockdown measures and social distancing.
Later in mid-April, OPEC and OPEC+ reached a historic agreement to cut production, a move supported by Russia, Saudi Arabia and the U.S. to stabilise both oil prices and global financial markets.
On Monday, U.S. oil markets crashed into below zero for the first time in history, reaching minus $4.29 a barrel on Tuesday.
