UAE Energy Minister Suheil al-Mazrouei said on Monday current low oil and gas prices are unsustainable and warned that if they last longer, it could lead to energy shocks.
Mazrouei said that “very good signs” of rising demand for oil have been seen in China and India, two of the world’s biggest crude consumers, and to some degree in Europe.
“This environment of low oil and gas prices, I don’t think it’s sustainable,” the minister said in a virtual interview hosted by the US-UAE Business Council.
Mazrouei said that if low oil prices persist for a long period, some of the current high-cost producers will drop out leaving a supply gap, pushing prices higher.
“We need someone to fill in that gap, otherwise we are going to have shocks in… prices and the last thing we want is to have shocks,” he said.
“We need to have stability and to have a reasonable and fair price.”
Brent crude crashed to multi-year lows under $20 a barrel and WTI (for May delivery) sank into negative territory in April for the first time in history as demand slumped due to coronavirus lockdowns and a global supply glut.
The two benchmarks have recovered to around $40 a barrel after the OPEC+ producers alliance agreed to record production cuts of 9.7 million barrels per day in April, effective for two months starting May.
Earlier this month, the alliance extended the historic cuts through July as governments around the world ease unprecedented lockdowns in many countries.
Mazrouei said that although oil consumption has dropped to 2013 levels “we think things will go back to normal within one or two years.”
“Unless we have a second wave of Covid-19, I think we will see a demand recovery at a pace that is adequate to the cut we have done as… OPEC+, provided other producers do not rush and over-produce,” Mazrouei said.
Yetunde Adegoke
