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Speaking in Switzerland, OPEC’s Secretary General said he expects prices to rebound

Abdullah al-Badri, Secretary General of OPEC, expects oil prices will remain low for another month before rebounding, reports CNBC.

Speaking at the World Economic Forum (WEF) in Davos, Switzerland, al-Badri said that he was unsure of how far oil prices might fall before coming back up, but expressed confidence that prices would not remain low for much longer. “I really cannot tell you [how low prices will go,] but I’m sure prices will rebound.”

Standing by their decision

While at the WEF, al-Badri also defended OPEC’s decision not to cut production. “If we had cut in November we would have to cut again and again as non-OPEC would be increasing production,” said the secretary general. “Everyone tells us to cut. But I want to ask you, do we produce at higher costs or lower costs? Let’s produce the lower cost oil first and then produce the higher cost.”

Global oil production

Oil Production by Country/Region as a Percentage of World Production. Numbers represent actual production measured in thousands of barrels of oil per day. Chart: Oil & Gas 360®, Data: EIA

Some members of OPEC continue to call on the cartel to cut production in order to bring prices back up. Venezuela in particular has been hurting from the low price of oil. With inflation growing to over 60%, Venezuela’s President Maduro has been visiting other countries in order to secure financing to keep the struggling economy afloat.

Despite the hard times some OPEC members are facing, al-Badri says the organization remains unified. “This is a collective decision. It is agreed by all the ministers,” he said. “We are more united than ever… We are a very strong group.”

Claudio Descalzi, head of Italian energy company Eni (ticker: E), said that the long-term effect of that decision could be costly, however. Descalzi said that unless OPEC starts trying to restore stability to the oil market, the cartel’s decision could lead to prices shooting over $200 per barrel a few years down the line, reports Reuters. “What we need is stability,” he said. “OPEC is like the central bank for oil which must give stability to the oil prices to be able to invest in a regular way.”

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Important disclosures: The information provided herein is believed to be reliable; however, EnerCom, Inc. makes no representation or warranty as to its completeness or accuracy. EnerCom’s conclusions are based upon information gathered from sources deemed to be reliable. This note is not intended as an offer or solicitation for the purchase or sale of any security or financial instrument of any company mentioned in this note. This note was prepared for general circulation and does not provide investment recommendations specific to individual investors. All readers of the note must make their own investment decisions based upon their specific investment objectives and financial situation utilizing their own financial advisors as they deem necessary. Investors should consider a company’s entire financial and operational structure in making any investment decisions. Past performance of any company discussed in this note should not be taken as an indication or guarantee of future results. EnerCom is a multi-disciplined management consulting services firm that regularly intends to seek business, or currently may be undertaking business, with companies covered on Oil & Gas 360®, and thereby seeks to receive compensation from these companies for its services. In addition, EnerCom, or its principals or employees, may have an economic interest in any of these companies. As a result, readers of EnerCom’s Oil & Gas 360® should be aware that the firm may have a conflict of interest that could affect the objectivity of this note. EnerCom, or its principals or employees, may have an economic interest in any of the companies covered in this report or on Oil & Gas 360®. As a result, readers of EnerCom’s reports or Oil & Gas 360® should be aware that the firm may have a conflict of interest that could affect the objectivity of this report.