Oman's Al-Rumhy: High Prices Don't Reflect Fundamentals

As crude prices hit a new multiyear high on Tuesday, Oman's oil minister told Energy Intelligence that the price rise was not justified by market fundamentals and that a correction is likely to occur soon.

"The fundamentals do not support these increases. The market is well supplied, therefore I expect a correction soon," Mohammed al-Rumhy told Energy Intelligence in an interview on Tuesday.

Earlier this month he told reporters that Opec-plus does not want to see oil trading at $100 per barrel.

However, Energy Intelligence understands that the group has not started any talks about what it could to prevent that from happening.

Brent crude futures traded above $87/bbl on Tuesday — their highest level in more than seven years — on worries about possible supply disruptions after Yemen's Houthi rebels claimed responsibility for an attack on the United Arab Emirates.

The deadly attack struck an Abu Dhabi National Oil Co. (Adnoc) fuel terminal in Abu Dhabi and a site near the city's airport, killing three people.

Dwindling Spare Capacity

"There is no doubt that geopolitical tension in the region is affecting oil prices," Ali al-Riyami, founder of Oman's ARC consultancy, told Energy Intelligence.

Al-Riyami cited "the fact that there's still no clarity on the Iran nuclear deal and also the news of the unfortunate attacks in Abu Dhabi."

But he added that he did not expect oil to climb into triple-digit territory, predicting that prices would undergo a correction soon.

Two Opec-plus delegates said , there are currently no talks within the alliance to address the current level of oil prices.

Opec-plus is scheduled to hold its next monthly meeting on Feb. 2.

The alliance has been aiming to increase its production at a monthly rate of 400,000 barrels per day since August, but has been falling short of that goal because some member states are unable to raise output in line with their quotas.

This has focused oil market attention on the issue of the alliance's shrinking spare capacity, which could hamper efforts to ramp up output in the event of a sudden disruption to global supply.

"[As of now] Opec-plus cannot ease the market situation," said al-Rumhy.

According to Energy Intelligence data, Opec-plus spare capacity currently stands at 3.5 million b/d.

One Opec-plus delegate said recent market volatility was the result of factors beyond the alliance's control, leaving its hands tied.