Gulf to Recover Sooner from Slumping Oil

DUBAI - Oil-rich countries in the Gulf are likely to recover much earlier than expected from slumping oil prices as global consumption will accelerate once major economies begin to recuperate from the financial crisis.

By Rocel Felix

Published: Tue 13 Jan 2009, 1:09 AM

Last updated: Sun 5 Apr 2015, 9:36 PM

“The period of low crude prices is not expected to last longer as we start to focus on the fundamentals again, we are moving from the speculation of financial markets to the real market fundamentals of supply and demand,” said Mohammed Husain, deputy chairman and deputy managing director for planning of Kuwait Oil Company at the sidelines of the Offshore Arabia Conference & Exhibition.

“The reality is that consumption of oil will keep growing.”

The international conference and exhibition is being held at a crucial time for the major oil and gas producers in the region, when oil prices have hit new multi-year lows on account of the global economic meltdown. The oil-dependent countries in the region as a result, expect domestic growth to ease this year as revenue from oil exports decline. Oil prices have hit the skids, tumbling more than 70 per cent from its peak of $147 a barrel in July 2008.

The Gulf Cooperation Council which supplies nearly 20 per cent of the world’s oil demand, consists of Saudi Arabia, the region’s largest economy, the United Arab Emirates, Kuwait, Qatar, Oman and Bahrain. The Organisation of Oil Exporting Countries, cut output 1.5 per cent in December to the lowest in 16 months to counter the first annual drop in prices since 2001.

Husain earlier in his speech urged oil and gas companies not to lose sight of the fact that the current slump in oil demand and prices is very temporary.

“The crisis should be looked at as a short-term setback. Companies should think long term and not drop everything. If they go ahead with their expansion plans, then they can capture the opportunities when prices are attractive again,” Husain told Khaleej Times.

Husain said that global consumption is going down as consumers worldwide do not know when the economic downturn will be reversed. In the US, the world’s largest economy and biggest oil user, the huge job losses have kept millions of consumers off the road as they drive less and are spending less.

Despite the uncertainty, there is no reason for oil and gas companies in the Middle East to feel threatened, downplaying more recent and more aggressive moves to pursue alternative energy sources.

rocel@khaleejtimes.com