RTRS: Oil at $50 will help economy, hinder investment: UAE
An oil price of $50 a barrel may help the global economy recover faster, the UAE oil minister said, but could deter investment in capacity among non-OPEC producers according to International Energy Agency estimates.
"$50 will hopefully help the economy to recover more quickly," United Arab Emirates Oil Minister Mohamed al-Hamli told reporters on the sidelines of an energy conference in Dubai.
Hamli said the UAE, an OPEC member and the world's fifth-largest oil exporter, would go ahead with capacity expansion projects but that the decline in oil prices placed the burden on producers to invest in anticipation of future demand.
"A new round of heavy investment is required if we are to avoid another cycle of high oil prices," he said.
"Such investment represents a major burden for resource-holders, all of which have their own development agenda and competing calls for funds."
A decline in oil prices from their peak near $150 a barrel in July has raised concerns that oil producers may become more reluctant to invest in boosting capacity, raising the prospect of a new cycle of high oil prices once the global economy, and demand for crude oil, recovers.
Oil fell more than 3 percent to below $49 a barrel on Monday, weighed down by a rising U.S. dollar and growing caution about the pace of any economic recovery.
The International Energy Agency does not expect a recovery in oil demand until early next year but its deputy executive director Richard Jones said a lack of investment could cut non-OPEC supply capacity by 360,000 barrels per day in the next 18 months.
"Current declines in investment will have an impact on capacity and capacity declines could already be underway," Jones said.
Hamli declined to say whether OPEC might cut output further at its meeting in late May but Jones said he did not expect a cut.
Both agreed that the markets were well-supplied.
"The market is certainly well supplied. A lot of refineries are not running at full capacity. A lot of oil is going into storage," Hamli said. "We've seen that stocks are building up. We've seen them go from 52 days to close to 59 days."
