Oil falls below referential price

Oil barrel price Friday fell to less than $45. This threatens the government’s financial balance in Algeria as it adopted $45 as a referential price in the Finance Act 2016.

As oil price went down to an expected level, the government will have to announce an emergency state.

Months ago, the government started expenses optimization policy.

According to the OPEC administration, the price fall is due to high demand and saturation in world oil market.

Economics expert Bachir Msitpha believes that the fall was expected in view of world conditions of oil industry.

“A new fall will occur in 2016. The government fixed oil referential price to $45 per barrel as it wanted to find larger resources for budget. Now, it will have to look for resources out of oil,” he told Echorouk.

Expert Abderrahmane Mebtoul said prices will go down starting from 2016 as Iran entered the market.

“The government should find quick solutions and conduct immediate reforms,” he added.

Reuters reported on Friday that oil is trading at around $45 a barrel, more than 50 percent below its price in June 2014.

“The recent decline in oil prices has encouraged additional oil demand,” OPEC said in the report. “It has also provided a challenging market environment for some higher-cost crude oil production, which has already shown a slowdown,” it said.

OPEC countries are expected to meet in December to decide in suggestions made by Algeria, two weeks ago.