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Qatar\u2019s Minister of State for Energy Affairs shared his thoughts on some of the major oil producers\u2019 market moves in recent months, shedding disapproval on the March decision by Saudi Arabia and Russia to launch into a price war, which sent oil prices into free fall.<\/p>\n
\u201cI think it was a very big mistake,\u201d Saad al-Kaabi told CNBC\u2019s Hadley Gamble from Doha. Al-Kaabi is also CEO of Qatar Petroleum. \u201cYou know, flooding the market is what caused us to go to a very low level. And then the pandemic basically took it almost to a very dangerous area where people could not afford to produce anymore. And we saw, you know, negative pricing in\u00a0(U.S. oil benchmark) WTI.\u201d<\/p>\n
The markets were already being devastated by the crushing drop in demand due to global coronavirus lockdowns. The call to open the taps on oil production pulled the floor from under the market as Saudi Arabia slashed its selling prices and increased production after Russia refused to join its plan to further cut output and boost prices in early March.<\/p>\n
The hit to producing countries revenue was harsh enough to bring OPEC and its non-OPEC allies \u2014 known as OPEC+ \u2014 back to the negotiating table. In April, they agreed to the largest production cuts in history at 9.7 million barrels per day. Those cuts have now been\u00a0extended through July, after the price of\u00a0international benchmark Brent\u00a0rose almost 40% in the month of May.\u00a0Brent\u00a0crude was still down more than 46%\u00a0year-to-date as of the end of May.<\/p>\n
\u201cNow, I think the actions that have been taken by the same group really is to agree what was agreed in the past and keep more sensible \u2026 to cater for the supply and demand that we\u2019re seeing,\u201d al-Kaabi said. Qatar left OPEC in January 2019 after six decades with the organization.<\/p>\n
\u201cSo there is a shortage of that coordination in the beginning of the year, now I think it\u2019s much better,\u201d he said. \u201cAnd hopefully the demand should pick up slowly with people coming out of quarantines all over the world, the lockdowns and especially the movement of transportation in general, mass transportation, airlines taking off again and so on.\u201d<\/p>\n
But the possibility of a second wave of coronavirus will continue to weigh on the energy outlook, including liquid natural gas prices. Scientists and health professionals have warned of a second wave of infections, which could slow the recovery to pre-pandemic levels, al-Kaabi said.<\/p>\n
\u201cWe may be more prepared for it and have less lockdowns around the world. If that\u2019s the case, then we\u2019ll see a much quicker recovery, maybe in six months to a year. If there is a second wave, then it could take a little bit longer,\u201d he said.<\/p>\n
Al-Kaabi added, however, that he isn\u2019t worried about the long term because it has largely been \u201cshort-term events that have affected\u201d prices. Still, he warned the coronavirus could have \u201csome long-lasting effects\u201d on travel and means of doing business.<\/p>\n
\u201cI think you\u2019ll see less people doing business by traveling and more using video conferencing and other means that we got used to now and working from home and so on. So, I think there will be some change in our attitude about whether it\u2019s business traveling or working from home,\u201d al-Kaabi said.<\/p>\n
This month marks three years since Qatar was first put under an economic and diplomatic blockade imposed by its neighbors Saudi Arabia, Bahrain, Egypt and the United Arab Emirates.<\/p>\n
The tiny gas-rich monarchy has expanded its trade relations in the years since after the action effectively cut its access to an estimated 60% of the goods it imported. The blockading countries charge Qatar of supporting terrorism, which the Qataris deny. The countries have yet to make diplomatic amends.<\/p>\n
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