Global oil prices have increased to $67.60 per barrel at the end of last week’s trading, compared to $66.40 at the start of trading, supported by OPEC, announcing extending oil production cuts for June and cancelling the meeting which was planned to be held in April, and the United States sanctions against Iran and Venezuela.
Former Vice Chairperson of the Egyptian General Petroleum Corporate (EGPC), Medhat Youssef, told Daily News Egypt that the retreat of discussions between Washington and Beijing to end the dispute between them threatens member countries in OPEC regarding extending production cuts until prices stabilise.
He pointed out that the fair oil price is $60 per barrel in international markets, and that the increase in the petroleum barrel prices in international markets negatively affects importing countries, such as Egypt, in terms of the increase in the monthly importation bill.
Furthermore, Youssef pointed out that a report issued by OPEC shows that the commitment percentage of its member countries to the cut in January reached 93%, after a cut by 890,000 barrels per day, compared to December 2018.
The report showed that Saudi Arabia has officially reported to OPEC that it cut its production to 9.75m barrels a day, 718,000 barrels less per day in January, compared to December 2018, which was less than the production in November by 1m barrels a day.
Kuwait has cut its production in January by 141,000 barrels a day to 2.71m barrels a day, according to the authorised pricing bodies. This cut was higher than expected.
Youssef stressed that the price of a petroleum barrel will not reach the $70 level sought by OPEC members until the meeting is held in June to discuss extending the production cut agreement until the end of 2019.
Member countries in OPEC will be unable to continue the cut in oil production in the global market because it affects their economic revenues and clients, he explained.
In 2016, the so-called OPEC+ coalition reached a historical deal to curb production in an effort to end an excessive oil price downturn. The agreement came into implementation early last year. Later, it was extended until the end of last year.
Oil gains declined due to crude oil production reaching a record-high level at 12m barrels a day and an increase in exports.
Such price hikes will definitely affect Egypt, as it is highly vulnerable to crude oil price fluctuations, since each $1 increase in the Brent crude’s prices would cost the country EGP 4bn.
Egypt’s 2018/19 budget sets global oil prices at $67 per barrel, while in the FY 2017/18, the price of an oil barrel globally was set at $55.
According to Reuters, Egypt had set the price per barrel in the 2019/20 draft budget at $68 per barrel.