Qatar warns of crude supply shock

The world faces a crude supply shock if oil prices remain below $70 per barrel, Qatar's Energy Minister Abdullah Bin Hamad Al Attiyah said on Wednesday arguing that lower prices would discourage investment in new capacity.

A price of $70 per barrel is needed "to avoid any (supply) shock in the future," he said, explaining that this price level should be sufficient to encourage companies and oil producers to continue investing in capacity expansion projects. "Below $70, it will be non-economical to invest in the hydrocarbon sector," Al Attiyah told the Gulf Petrochemical and Chemical Association (GPCA) forum. "Today there is no cheap oil" he added.

Now that the price has fallen dramatically to below $50, this could discourage investment in finding new deposits and extracting them from difficult places. Countries and oil companies may postpone many upstream projects if they do not get a return on their investments.

"So this is our concern that when the economic crisis is over and demand starts (to pick up) again, then the world will face a big shortage of supply," Al Attiyah said.

Read more: Gulfnews