Pakistan won’t suffer from OPEC+ oil production cuts: Experts
Statesman Report
KARACHI: Pakistan will not be immediately affected by an OPEC+ deal to cut production, petroleum experts say, as the country is on lockdown and demand has decreased by more than 70 percent.
“I don’t think the production cut would have any major impact on prices because at this point the market is oversupplied with around 40-50 million barrels and unless this stock is utilized no major price fluctuation is expected,” said Masood Abdali, a Texas-based energy expert and former business development manager of Weatherford in Saudi Arabia and Bahrain.
The cuts, agreed on during a virtual meeting of oil producers hosted by the Vienna headquarters of the Organization of Petroleum Exporting Countries, will take more than 10 million barrels of oil out of production each day for the immediate future.
“The consumption of petroleum products in Pakistan has dropped by more than 70 percent,” Dr. Ilyas Fazil, former CEO of Oil Companies Advisory Council (OCAC), told Arab News.
On Thursday, West Texas Intermediate (WTI) crude future contract, the American benchmark, was down more than 9 percent to $22.76 a barrel as coronavirus lockdowns imposed across the world brought the economy to a standstill.
Pakistan’s equity market was also under pressure on Friday due to declining oil prices, as investors felt the cut in production is not enough to offset the loss in demand resulting from the COVID-19 pandemic.
“This is a game of supply and demand and until the market is oversupplied the prices would remain depressed. Consumption of big economies like the US, China and Europe has witnessed a drastic drop,” said Dr. Nazar Abbas Zaidi, former secretary of the Oil Companies Advisory Council (OCAC).
The nationwide lockdown to contain the spread of the virus has resulted in three of the country’s six refineries halting their operations, following the government’s decision to stop crude oil imports in April 2020 amid low consumption.
Unfortunately, according to Zaidi, Pakistan has no storage facilities to benefit from the oversupply and low oil prices.
“This is the time to buy, but Pakistan has zero strategic storage as compared with the US, which capacity is 90 days, or India which has enhanced its capacity to 35 days,” Zaidi said.
According to Abdali, however, Pakistan could utilize its depleting oil and gas reservoirs to store low-priced oil to avoid future shocks.
“Pakistan can use its depleting reservoirs in Balochistan, Sindh and Khyber Pakhtunkhwa to store oil for its future needs and deterrent to price shocks,” he said.