'Balancing oil prices must to arrest drop in investments'

Defending OPEC nations' pledge to cut output, Qatar's Energy and Industry Minister Mohammed bin Saleh Al-Sada today said it will benefit all stakeholders as balancing oil prices is required to curb drop in investments in the sector and ensure supplies.

"The measures taken by OPEC will be in the benefit of all," Al-Sada said while addressing a ministerial session at Petrotech 2016 here.

Last week, OPEC countries had pledged to reduce their production by 1.2 million barrels a day. Non-OPEC countries also agreed to a production cut of 0.6 million barrels per day.

These proposed cuts caused oil prices to surge above USD 50 a barrel and there are apprehensions that prices will rise further.
 

Al-Sada explained that due to low oil prices, there was an unprecedented drop in investments in the oil and gas sector in the last two years.

"(There was) 25 per cent annual drop in investment in two consecutive years in oil industry. Not only that, it indicated that next year if the market does not show reality (firming up of oil and gas prices) or process of balancing again, (then) there would be huge drop in investment. That would (be a) shock to investment, economy and supply as a whole," he said.

Elaborating on the positive impact of the decision, he said, "Market is responding positively to the signs of the process of rebalancing. A little higher price may hamper the economy but does this seem to be true? Better oil price will be good for consumers.... This is the reality. It improves the inflation. It adds to the multipliers and improves the economy."

He was of the view that the balancing of oil prices should be based on the average of oil (price and supply) data of last five years.

However, addressing the conference earlier in the day, Oil Minister Dharmendra Pradhan said, "I want to submit before this august gathering that for the sustainability of the oil markets, we must strike a balance of interest between producers and consumers."

Recalling his statement before the OPEC forum in June last year, he said consumption of petroleum products is price sensitive as there is a genuine issue of affordability for a sizable population in India and other developing countries.

"Hence, while deciding the pricing aspect of crude oil, it should be factored in that the security of supply must, in turn, be matched by security of demand," he said.