$50 oil is ‘gift to the world’ says Abu Dhabi economic development chief

Oil at US$50 a barrel is a “gift to the world” as prices should be low enough to spur economic growth, according to the head of Abu Dhabi’s Department of Economic Development.

Prices will probably be at $60 next year, after hitting bottom at $45, Ali Majed Al Mansoori, the department’s chairman, said on Sunday in the capital. Brent crude has dropped 16 per cent this year, closing on Friday at $47.99, amid a global oversupply.

“It is a gift to the world that oil has dropped to $50,” Mr Al Mansoori said. “Would we like for oil to stay at $50? Absolutely not. We would like oil to go to $70, $80, but beyond that I think it would hurt the economic growth.”

Oil demand growth will climb to a five-year high of 1.8 million barrels a day this year before slowing next year amid a weaker outlook for the world economy, the International Energy Agency forecast in its October market report. And the market will probably remain oversupplied through next year as Iran exports more crude, should international sanctions be eased, the agency said.

Oil at $50 to $60 a barrel is a “win-win situation” because it benefits consumers and producers alike, Mr Al Mansoori said. For buyers, “it’s an opportunity for them now to use it as much as possible to set up their policies for economic growth in the next five years because ultimately the commodity is scarce”.

Declining oil prices will mean Abu Dhabi’s gross domestic product growth will be little changed next year, Mr Al Mansoori said. The emirate is doing what it can to expand the economy, but “if we don’t, we take next year as a challenge and turn this challenge into opportunity and turn 2017 with strong growth”, he said.

Major projects in Abu Dhabi will continue, however. The Midfield Terminal Building at Abu Dhabi International Airport is still scheduled to open in 2017, while a branch of the Louvre museum will open next year, Mr Al Mansoori said. In addition, Mr Al Mansoori said he is to meet architect Frank Gehry next month in Los Angeles to review the final design for the Guggenheim museum, also being built in Abu Dhabi, and move ahead with signing the museum’s contract.

Oil failed to sustain a rally above $50 a barrel this month amid signs the global surplus will drag out longer as Opec pumps above its target and Iran prepares to raise exports once sanctions are lifted. Doubts about the strength of demand growth in China added to the pressure on commodity prices.

“We should continue to see these large builds and additional supplies,” said James Cordier, founder of Optionsellers.com in Tampa, Florida. “It’s going to be difficult to build the bullish case.”

* Bloomberg