The price of Organisation of Petroleum Exporting Countries, OPEC basket of 13 crudes stood at $40.11 a barrelon Thursday, compared with $38.46 the previous day, according to OPEC Secretariat calculations.
The new OPEC Reference Basket of Crudes (ORB) is made up of the following: Saharan Blend (Algeria), Girassol (Angola), Oriente (Ecuador), Minas (Indonesia), Iran Heavy (Islamic Republic of Iran), Basra Light (Iraq), Kuwait Export (Kuwait), Es Sider (Libya), Bonny Light (Nigeria), Qatar Marine (Qatar), Arab Light (Saudi Arabia), Murban (UAE) and Merey (Venezuela).
The Secretary General of OPE, Dr. Abdalla S. El-Badri, said the market is currently going through a significant readjustment.
He said that since July 2014, prices have fallen by more than 70 per cent, many investments have been deferred and some cancelled, manpower has been laid off, supply has been greater than demand, stocks have risen above their five-year average, and the market has been searching for balance.
El-Badri said the pain of this readjustment is being felt across the industry.
â€œThese are tough times.Â But we should also remember that â€˜tough timesâ€™ are nothing new for the industry.Â It has been here before.Â The story of our industry is one of many cycles, both up and down. We have had periods when prices were low, and periods when prices were high.Â We have seen times when supply outstripped demand, and times when supply has struggled to keep up.Â There have been long periods of stability, as well as periods of instability.
â€œOf course, every situation is different, and in this current cycle it is important to ask the questions:Â how did we get here, and how might we get out? It is well documented that the cycle on this occasion has been supply-driven, with most of the supply increases in recent years coming from high-cost production.Â Until 2015, all of the supply growth since 2008 has come from non-OPEC countries.Â Between 2008 and 2014, overall non-OPEC growth was more than 6 million barrels a day, while OPEC actually saw a contraction.
â€œIn fact, in 2013 and 2014, OPEC supply fell by more than 1 million barrels a day and non-OPEC grew by 3.7 million barrels a day.Â To put this in some context, global demand growth over these two years was 2.3 million barrels a day. In 2015, this dynamic changed as expansion was seen from both non-OPEC and OPEC.Â Non-OPEC grew by slightly over 1.2 million barrels a day, and OPEC at around 1 million barrels a day. These numbers are important when we look at the growth in OECD commercial stocks.Â As this graph highlights, the five-year average was at its lowest level at the end of 2013.Â Since then the five-year average has risen dramatically, from a negative level of 85 million barrels to a surplus of more than 260 million barrels at the end of 2015.Â There is no doubt this has strongly impacted crude prices.â€