Markets were already devastated by the overwhelming fall in demand due to global blockages of coronaviruses. Call to turn on oil production pulled the sub-market floor as Saudi Arabia cut selling prices and increased production after Russia refused to join its plan to cut more production and raise prices in early March.
The blow to producer countries’ earnings was hard enough to bring OPEC and its non-OPEC allies – known as OPEC + – back to the negotiating table. In April, they agreed to the largest production cuts in history with 9.7 million barrels a day. These reductions have now been extended until July, after the price of the international benchmark Brent rose nearly 40% in May. At the end of May, Brent crude oil was still down more than 46% from the start of the year.
“Now I think the steps that have been taken by the same group are really agreeing on what has been agreed in the past and staying more reasonable … to meet the supply and demand that we are seeing” said al-Kaabi. Qatar left OPEC in January 2019 after six decades with the organization.
“So there is a shortage of this coordination at the start of the year, now I think it is much better,” he said. “And I hope that demand should recover slowly with people quarantining around the world, blockages and in particular the transport movement in general, public transport, airlines taking off again, etc. ”
But the possibility of a second wave of coronavirus will continue to weigh on energy prospects, including prices for liquid natural gas. Scientists and health professionals have warned of a second wave of infections, which could slow recovery to pre-pandemic levels, said al-Kaabi.
“We can be better prepared for this and have less blockages in the world. If this is the case, then we will see a much faster recovery, perhaps in six months to a year. If there is a second wave, then it could take a little longer, “he said.
Al-Kaabi added, however, that he was not concerned with the long term as it was largely “short-term events that affected” prices. Still, he warned that the coronavirus could have “lasting effects” on travel and business.
“I think you will see fewer people doing business while traveling and more people using videoconferencing and other means that we are used to now and working from home and so on. So I think our attitude will change business trips or working from home, “said al-Kaabi.
This month marks three years since Qatar was first subjected to an economic and diplomatic blockade imposed by its neighbors Saudi Arabia, Bahrain, Egypt and the United Arab Emirates.
The small gas-rich monarchy has expanded its trading relationships over the years because, after the action effectively cut off access to about 60% of the goods it imported. The blocking countries accuse Qatar of supporting terrorism, which the Qataris deny. The countries have not yet made an honorable diplomatic amends.
– Christine Wang of CNBC contributed to this report.