Iraqi Oil Minister Adel Abdul Mahdi predicted Wednesday that world prices would not fall much further after a plunge of nearly 60 percent since June.
“Our estimate is that the prices have reached the bottom. It is very difficult to drop lower than this,” Abdul Mahdi told a conference in Kuwait.
“We do not find any real justification for the big and persistent drop in oil prices,” said the Iraqi minister whose country is the second largest OPEC producer after Saudi Arabia.
“A number of factors will work to correct oil prices upward.”
Oil rebounded in Asia Wednesday, with international benchmark Brent North Sea crude for March, adding 44 cents to $48.42, as traders bought the commodity at cheaper prices following a slide to near six-year lows.
But analysts do not expect the rebound to last, as weakening global demand and a supply glut show no signs of abating, especially after the latest gloomy IMF forecast for the global economy.
The Iraqi minister said current low prices will knock out part of the high-cost production, especially shale oil.
This is likely to reduce the amount of surplus production, currently estimated at 2.5 million barrels per day, and support prices, he said.
The world’s biggest miner BHP Billiton said on Wednesday that it was cutting back its operating US shale oil rigs by 40 percent because of the price slump, but still expected output to rise for the financial year.
World prices have been falling since June but the pace of the slide accelerated in November when the Organization of the Petroleum Exporting Countries (OPEC) decided to maintain its production unchanged at 30 million barrels per day.
OPEC’s top producer Saudi Arabia has said it will not cut production for fear of losing market share.
Its close ally the United Arab Emirates has said the price slump was necessary to correct oversupply by shale producers.
However, Abdul Mahdi said that other cartel members had been attempting to broker an output cut in coordination with the world’s top crude producer, non-OPEC Russia, to shore up prices.
“Venezuela is exerting huge efforts … and there are contacts involving Russia and OPEC to try and cut production,” he said.
But the International Energy Forum, which groups 76 member countries, including consumers as well as producers, did not share the Iraqi minister’s confidence about a swift reduction in surplus production.
“It is still very hard to say when the oil market will be in balance,” IEF secretary general Aldo Flores-Quiroga told the conference.
He said that based on IEF figures, the United States has boosted global supply by 1.2 million barrels per day over the last 11 months.
Brazil added an average of 217,000 bpd of supply over the past 10 months, and China also raised its output.
“US output growth has more than compensated production losses elsewhere,” Flores-Quiroga said.
He said that based on available statistics, there will still be surplus supplies of crude in the second quarter of 2015.