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The fine art of forecasting
Fereidun Fesharaki, Chairman and Chief Executive Officer, FACTS Global Energy, thinks the recent oil price roller-coaster ride is set to continue. Downstream, he thinks the outlook for refiners in the USA and Europe looks decidedly difficult. He shared his views at the Shell Global Solutions' Regional Symposiums in Barcelona and Calgary.
Fereidun Fesharaki speaking at Shell Global Solutions' Regional Symposium: "High prices must ultimately return."
If the Organisation of Petroleum Exporting Countries (OPEC) had not re-exerted its influence over the market, the steep decline in the price of oil from an all-time high of almost $150 a barrel in July last year would have been even more dramatic, says Fesharaki.
"Without OPEC's swift move to cut daily production by nearly four million barrels a day, the price of oil might have fallen to as low as $20 a barrel," he says. "This would have been bad for business, bad for oil producers and bad for consumers. It is worth stressing that it would also have been bad for those who are seeking to promote alternative sources of energy."
So, following a period when it had seemingly lost control of the market, OPEC is back in business, having buoyed the price of oil at $55–60 a barrel – but for how long? Well, in Fesharaki's view, it could be some time before we begin to see the price spiralling upwards again. That production cut, which was mainly borne by Saudi Arabia, now constitutes excess supply. Add the new production coming on-stream in the Middle East, and it could be that the world will soon have up to eight million barrels a day of spare capacity.