Oil prices surged to around $59.90 a barrel in yesterday’s trading, up $5 from last month’s prices, amid supply cuts by global markets and a decline in the number of American rigs.
Medhat Yousef, former deputy chairperson of the Egyptian General Petroleum Corporation (EGPC), informed Daily News Egypt that the production cut in the OPEC countries and Russia aims to reach a price of $60.
He pointed out that oil-exporting countries agreed to reduce production to reduce supply in world markets until the price reaches the target.
Moreover, he warned of the decline in global demand for petroleum products in the coming period, because of the deteriorating economic conditions of the largest importing countries.
OPEC oil exporting countries have begun to demand a continuation of the agreement to cut production rates for a new period until the price of a barrel of oil is around $60.
He pointed out that the high price of a barrel of oil in world markets adversely affects the economies of importing countries such as Egypt, which makes them bear a greater financial burden.
This will definitely affect Egypt as it is highly vulnerable to crude oil price fluctuations, as each $1 increase in the Brent crude’s price would cost the state EGP 4bn, according to the Finance Ministry. Egypt’s fiscal year 2018/19 budget sets global oil prices at $67 per barrel, while in the 2017/18 budget, the price of an oil barrel globally was set at $55.
The price of a barrel of oil will not be $65 in the first quarter of this year, if the OPEC extends the agreement to cut production in 2019 he added.
The United States has reduced the number of excavators looking for new oil production to 873 diggers from the beginning of the current year compared to 888 diggers in 2018, which may affect production increase that reached 2m barrels per day in the last year, with production reaching 11.7m barrels per day.
The OPEC has approved an agreement, in cooperation with a number of the largest oil-producing countries outside the organization, led by Russia—which is currently the largest producer of oil in the world—in November of 2016, aiming to reduce production by about 1m barrels. The agreement entered into force at the beginning of 2017, and later was extended until the end of 2018.