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(Bloomberg) -- Oil prices should increase to an average of $60 a barrel by the end of this year as demand from Europe increases because of economic stimulus from the European Central Bank, said Qatar’s Economy and Commerce Minister,
While crude prices will rise, they won’t go back to $100 a barrel for two years, Sheikh Ahmed Bin Jassim Al Thani said at the World Economic Forum in Davos, Switzerland. He expressed support for a meeting between the Organization of Petroleum Exporting Countries and oil producers outside the group to discuss ways bolster prices, which was suggested by Iraq’s Vice President Ayad Allawi on Jan. 21.
“I don’t know what will happen in the next OPEC meeting, but OPEC and non-OPEC normally should tackle this problem,” he said in an interview on Friday. “It’s always good to have a discussion,” he said when asked about the Iraqi proposal.
Oil plunged more than 50 percent since June to the lowest since 2009 as OPEC’s 12 members refused to cut output and yield market share to rising U.S. oil shale production. Investment in oil will fall by $100 billion this year because of the slump and there will be upward pressure on prices in the second half, according to the International Energy Agency.
ECB President Mario Draghi pledged Thursday to buy European government bonds worth at least 1.1 trillion euros ($1.3 trillion) to counter the threat of a deflationary spiral in the region. The bank will spend 60 billion euros per month until at least the end of September 2016 to revive a near-stagnant economy.
The ECB’s move is positive for prices because “it means more business and more demand for oil,” Sheikh Ahmed said.
Qatar based its budget on a price of $65 a barrel for the current fiscal year, and will have a lower underlying price for the next fiscal year starting in April, Sheikh Ahmed said without giving an estimate for the price. Surplus revenue in recent years, when crude sold for about $100 a barrel on average, generated reserves that allow the nation to keep spending on projects, including infrastructure to host the soccer World Cup in 2022, he said.
“Our plans for infrastructure development and investments are going as planned,” Sheikh Ahmed said. “It will not be affected by the oil price going down, thanks to the conservative numbers that we have.”
Qatar is OPEC’s 10th largest producer with average daily output of 680,000 barrels in December, according to Bloomberg estimates. The country’s revenue is less affected than other OPEC nations by the price slump because it is also the world’s largest exporter of liquefied natural gas, Sheikh Ahmed said.
Qatar Petroleum’s decision last week with Royal Dutch Shell Plc to cancel a $6.5 billion petrochemical project is due to lower than expected demand and to pursue better business opportunities, not because of lower oil prices, he said.
To contact the reporters on this story: Maher Chmaytelli in Davos at firstname.lastname@example.org; Maggie Day in Davos at email@example.com To contact the editors responsible for this story: Alaric Nightingale at firstname.lastname@example.org James Herron, Rachel Graham