The Prime Minister’s financial advisor, Mohammed Shia Al-Sudani, expressed concern regarding the impact that the global drop in oil prices would have on Iraq, which derives more than 90% of its resources from oil revenues.
A few days ago, oil prices had fallen to $76.
According to Mazhar Mohammed Saleh, “There has been a gradual decline in global oil prices for the past few days, as this decline coincides with the decline in the value of financial assets in the American and Japanese markets, particularly the decline in the benchmark oil (Brent crude), which is currently hovering around $76 per barrel for futures contracts after reaching nearly $88 per barrel in June, which necessitates greater caution and economic foresight and what it may have of effects on our country’s financial resources in
He added, “Nonetheless, there are two prospects that might restrict the crumbling of oil markets to the base assuming they occur. Oil is a strategic material that has priority in demand and storage in the difficult and exceptional circumstances that the Western world is going through. The first is that the continuation of the current international geopolitical tensions in Eurasia, the Middle East, and elsewhere will remain a pressure factor that does not allow the deterioration of energy resource prices (oil and gas) in the world. The second is that China and India, the two largest economies in major Asia that contribute to global economic growth, have not been affected by the current economic recession in Western financial markets. This means that opportunities for economic growth still require the continued demand for energy resources, particularly oil.
According to Saleh, “the fluctuation of the oil asset cycle towards a decline and the occurrence of a glut in the oil markets may remain a temporary and short-term matter from our point of view,” even if “some parts of the global economy enter a recession or reach a state of depression and extend for the next six months, similar to what happened in 2008 with the financial crisis (the mortgage crisis).”
“Prevailing expectations until recently saw the global oil market as an optimistic market represented by rising prices,” he said. “Especially in light of strategic production adjustments by OPEC+, amid regional and international economic and political developments with varying impacts on global oil demand.”
The government advisor explained that “the US Energy Information Administration had previously announced this year that it expected average prices to reach about $89 per barrel of oil and continue until the end of the year in 2024, which encouraged the US oil market to invest in marginal shale oil fields with high extraction costs,” and that this was the reason why the US Energy Information Administration was predicting such high prices.
