Muscat: Prices of Oman crude are expected to stabilise around $85 in the foreseeable future, having crossed the 80-dollar mark on Wednesday.
That’s according to Hiriyanna Narayanaswamy, the chief financial officer for Al Maha, who added that the recent spike in oil prices was due to a number of factors.
“Firstly, there is more demand now because many industries that were closed during the COVID-19 pandemic have reopened,” he said.
“Now, there is more demand for oil among manufacturing companies. Similarly, now that tourism has taken up again, there is also increased consumption of products such as aviation fuel, which was not there for most of last year.
“More and more countries are opening up again and vaccinating their people at a steadily increasing rate, so that means there will be more demand for products and services once again,” he added.
The price of Oman crude reached $80.46 on the Dubai Mercantile Exchange on Wednesday, October 6, having risen by nearly a dollar from the earlier rate.
The CFO for Al Maha noted that despite the pandemic, the oil price at present was higher than it was during the closing months of 2019, when it was roughly around $65 a barrel. He added that the lower oil price at that time was because of a number of external factors.
“At that time, it was believed that e-vehicles and green fuels would take over the market soon – maybe in a couple of years’ time,” he said. “Many thought that green vehicles would become the mainstay of the market soon, and that is why the oil prices were lower before the pandemic. If things stay like this, the price of oil will reach about $85 a barrel.”
“But as we can clearly see, that has not happened,” added Narayanaswamy. “That there is still a very strong dependence on oil and gas means prices will stay strong for now. It is not as easy as many expect to make the transition from current hydrocarbon-based forms of energy that we see now, to green energy, although there are big strides being made in this sector.”
He said that lower demand for oil at the end of 2019 also had a role in bringing down the prices, adding that while the rate for oil remained high right now, any policy changes made by oil-producing countries in the coming months that negatively impact prices could see them come down.
“A country deciding to cut production, for example, would bring up the price of oil, while expanding oil extraction could lead to a fall in oil prices. Similarly, more demand for oil and oil-based products automatically pushes up demand.”
