Azerbaijan’s oil price to be $55 per barrel

Azerbaijan’s oil price to be $55 per barrel

14 November 2019, 15:23 673

Experts believe this figure to ensure against any possible adverse scenarios

"The oil price is expected to be $55 per barrel in next year's budget,” said Executive Director of the State Oil Fund of Azerbaijan (SOFAZ) Shahmar Movsumov while speaking about the fund's income and expenses. Is this figure optimal? How will oil prices fluctuate over the next year?

Head of the Center for Oil Research, Ilham Shaban, said the $55 oil price would ensure the budget against any possible adverse scenarios. "International energy agencies and financial institutions have not changed their forecasts on average oil prices for next year. That is, the forecasts show that the price of Brent oil will fluctuate around $62-63 next year. In this regard, the Azerbaijani government's decision to set oil prices at $55 in 2020 is acceptable. In the current year, prices have shown a 10% decline rate compared to last year. This figure will decline next year as well,” he noted.

Energy expert Zafar Valiyev said that given the current market prices, $55 is an acceptable figure. "If there is a high rate of growth in industrial production, oil demand will also be high. As the global economy slows down, demand declines and prices fall. But prices are not just based on economic factors. Political factors influence prices more. Therefore, OPEC should take into account the geopolitical risks, economic performance, and other considerations during the December meeting. One of the key issues is that OPEC and its allied countries can achieve long-term price stability. If this takes place, next year's oil price will be around $60-65, which is a quite reasonable price for us,” he added.

According to the expert, next year's oil price will depend on the OPEC December meeting. "The meeting will discuss oil forecasts of the technical staff operating under the OPEC Vienna Agreement and the OPEC secretariat. If OPEC and its allies make long-term market regulatory decisions, prices may change around $55-60 next year. A few days ago, the forecasts made by several leading world banks for the next year were pessimistic. There are quite serious reasons for that. The ongoing trade war between the US and China, aggravation of the situation around Iran and Venezuela, and tensions in the Middle East are affecting oil demand. Therefore, in December OPEC and its allies should make the right decisions. A few days ago, the OPEC Secretary-General made the announcement. It is not appropriate to think that oil prices will rise. Long-term fluctuations in prices should be avoided. Heavy and light oil balances should be maintained, and oil products balance should be restored in all energy markets around the world,” Valiyev noted.

"Oil production in Norway and the US is expected to increase next year,” he said. "Production on two fields in Norway is steadily increasing. The volume of oil extracted from shale oil fields in the US will also increase. Therefore, prices must be at least $50 in order to continue production at higher rates. This is an acceptable price for both energy companies producing shale oil and traditional oil production companies. Since May, the participants of the Vienna agreement have been able to achieve proper regulation of the daily production and export volumes. The prices are heading towards stabilizing. If this mechanism continues next year, prices will remain acceptable.”