BEIJING (Xinhua) – As the battle between supply and demand wages on in the global oil market, the sector is looking for its new balance, with oil prices unlikely to plummet from the current level, an expert on the oil industry said.
The world is currently witnessing excess capacity of 3 to 5 million barrels per day. With suppliers dominate the market, OPEC and US shale producers are fiercely juggling to define the new benchmark crude prices, but neither will budge, Nansen Saleri, former head of Reservoir Management for Saudi Aramco, told Xinhua in Beijing.
Despite the recent oil price collapse, the global prices will first stabilise before edging up, but will not reach 100 US dollars per barrel any time soon, he predicted, adding that the price will not likely dive to 20 or 30 dollars per barrel as forecast by analysts.
“We are expected to see the establishment of a new normal of the global oil market in the next 6 to 12 months with the oil prices hovering around 60 to 80 dollars, or maybe 90 dollars per barrel,” said Saleri, President and Co-Founder of QRI, a Houston-based industry advisory agency.
Brent crude rose above 60 dollars a barrel on Friday for the first time this year, with rigs being pulled out of oil fields in the United States.
China’s efforts to set a minimum inventory level for commercial crude oil is a “rational decision,” said Saleri.
“Fifteen days’ of oil reserve is a wise choice and is consistent with worldwide practices,” he said.
All Chinese crude oil refineries must keep their inventories above 15 days’ average processing level, and no less than 10 days’ deposits if international crude oil prices exceed 130 dollars per barrel to keep the domestic oil market stable, according to a guideline issued in January by the National Development and Reform Commission (NDRC), China’s top economic planner.
Oil inventories for US refineries and oil traders reached a record high in the past week, equalling about one month of market supply, Saleri said.
US Strategic Petroleum Reserve (SPR) can provide further relief to supply fluctuation and cushion the gap between market demand and supply. US SPR can sustain two to four months of market demand depending on consumption and import levels, he said.
China, which imported 308 million tonnes of oil last year, had built six national strategic oil reserve bases and 25 commercial reserve bases by the end of last year, with a reserve capacity of 141 million barrels and 307 million barrels respectively, according to China National Petroleum Corporation (CNPC) Economics & Technology Research Institute.
China’s national strategic oil reserve only translated into less than one month of its imported oil volume, and the nation should beef up its reserve to about three months of its imported volume, some analysts said.