OPEC Secretary General: Oil prices are falling due to fears of an economic slowdown

The new Secretary-General of the Organization of the Petroleum Exporting Countries (OPEC) told Archyde.com that the recent decline in oil prices reflects fears of an economic slowdown and masks actual market fundamentals, while expressing a relatively optimistic view of the market outlook for 2023 as the world grapples with rising inflation. Haitham Al-Ghais, who took office on August 1, said that demand for oil is strong in the physical market, and that concerns about the slowdown in the Chinese economy are exaggerated, adding that demand is likely to find support from the use of jet fuel with increased travel. Brent crude price approached an all-time high of $147 a barrel in March after Russia’s attack on Ukraine fueled supply concerns. Prices have since fallen, hitting a six-month low of less than $92 this week. “There is a lot of fear … a lot of speculation and anxiety, and that is the main reason behind the price drop … while in the actual market we see things very differently. Demand is still strong. We remain very optimistic about the future,” Al Ghais said in an online interview. demand and are very optimistic about demand for the rest of this year.” “The concerns about China are really disproportionate in my view… China is still an amazing place for economic growth,” said Al Ghais, who has worked for four years in China. OPEC, Russia and other allies in what is known as the OPEC Plus grouping modified the record oil production cuts they implemented in 2020 at the height of the Corona pandemic, and are working to raise oil production by 100,000 barrels per day in September. Before the next OPEC Plus meeting, which will be held on the fifth of September, Al-Ghais said that it is too early to determine what the organization will decide, although he was optimistic about the expectations for the next year. “I want to be very clear on this issue, we can reduce production if necessary, we can also increase it if necessary … It all depends on how things develop. But we remain optimistic, as I said. We are already expecting a slowdown in demand growth in the year 2023, but it shouldn’t be worse than what we’ve seen before.” “Yes, I’m relatively optimistic,” he said of the 2023 outlook. “I think the world is dealing with inflationary economic pressures in a very good way,” he said. On the rise in prices, Haitham Al-Ghais said that policy makers, lawmakers and poor investments in the oil and gas sectors are the ones who are to blame for the rise in energy prices, not OPEC. The lack of investment in the oil and gas sectors in the wake of the price slump due to COVID-19 has significantly reduced OPEC’s spare production capacity and limited the organization’s ability to respond quickly to further potential supply disruptions. Brent crude price approached an all-time high of $147 a barrel in March after the Russian attack on Ukraine exacerbated supply concerns. Although prices have fallen since then, they remain high, burdening consumers and businesses on a global scale. Al-Ghais said, “Don’t blame OPEC, but blame your policy makers and legislators, because OPEC and the producing countries were pressing for investment in oil and gas.” The International Energy Agency reported last month that investment in oil and gas was up 10 percent from last year but still well below 2019 levels, adding that some of the immediate shortfall in Russian exports should be offset by increased production from elsewhere. The new Secretary-General of OPEC also noted the lack of investment in the downstream sector, adding that OPEC members have increased refining capacity to offset the decline in Europe and the United States. He stated that OPEC aims to ensure that the world has enough oil, but “it will entail great challenges and severe difficulties if there is no understanding of the importance of investment,” adding that he hopes that “investors, financial institutions and policy makers also take this issue seriously and put it in the their future plans.