© Fadel Gheit
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I expect oil prices to continue to be impacted by global events including the turmoil in the Middle East, which continues to get worse, keeping oil prices inflated by supply concerns.
Lately there have been some concerns on Saudi Arabia's oil exports, as the country is almost completely dependent on crude, and it is expected that the world will need less oil in the future. What is your opinion on this matter?
Saudi Arabia's economy is totally dependent on oil export revenues and its rapid population growth will result in increased domestic oil demand and reduced oil export volume and revenues. The government has failed to diversify the economy and a sharp drop in oil prices could have a serious negative impact on its economy and could destabilize the country.
U.S. oil production reached 7.5 million barrels a day in July, the highest monthly output level since 1991. Do you see the lawmakers removing the limits on crude exports in the future?
It is difficult to predict what Washington will do, but high oil prices should continue to boost domestic production. However, the US is still importing more than 50% of its oil consumption. There is a ban on crude oil export from the US, but light sweet crude production has exceeded domestic demand levels and the industry is calling on Congress to allow swapping light sweet crude for heavy sour crude, which would benefit both oil producers and petroleum refiners in the US.
What performance do you expect from oil, as soon as the Fed starts tapering QE?
Oil prices supported more by supply concerns than market fundamentals of tight supply and increased demand. Unfortunately oil prices will remain inflated by fears of potential supply disruptions. I believe oil prices are inflated by about 20%. The global economy is growing more energy efficient with declining energy intensity, particularly for oil. Oil demand growth is likely to be below 0.5% and could even decline. Thus, the $100 oil price is not sustainable, in my opinion..
What are your short term and longer term forecasts for crude oil price?
Volatility will continue depending on global events. What is going to happen in the Middle East? Will Egypt face the civil war, causing a spill-over effect on other parts of the Middle East? Will the civil war in Syria be contained? Finally, will the U.S., Israel and the rest of the world allow the Iran to continue its nuclear programme? All these are very important factors to consider and nobody knows what the outcome will be. Without any doubt, they will have impact on crude oil prices in the near term and in the long term. Barring any global event that will scare people and investors and will send crude oil prices higher, I think oil prices are inflated and likely to go down.