Oil price falls? Why you should relax: OPEC head

Fundamentals don't justify oil price slide: OPEC chief
Fundamentals don't justify oil price slide: OPEC chief   

Those panicked by the recent plunge in oil prices should "sit and relax," according to the head of the Organization of the Petroleum Exporting Countries (OPEC) - the group of the world's biggest oil exporters.

"The media is really panicking and the market is panicking, the consumer is panicking and the producers are panicking. We really should sit and relax and look into the situation," Abdalla Salem el-Badri, secretary general of OPEC, told CNBC.

Oil workers conduct a drill in a petroleum well in Lagunillas at the east coast of Lake Maracaibo near Maracaibo City in Venezuela.
Jorge Silva | Reuters
Oil workers conduct a drill in a petroleum well in Lagunillas at the east coast of Lake Maracaibo near Maracaibo City in Venezuela.

He argued that the recent plummet in the oil price is down to "speculation" by traders, rather than oversupply as some have suggested.

"The fundamentals do not really deserve this decline in price. Oversupply in the market is not really that much to deserve a 28 percent decline," he said. "We are looking at speculation, that has some effect on it."

There have been some suggestions that some OPEC states, like Saudi Arabia, are driving the price of oil down to keep their market share, in the face of increased competition.

OPEC's dominance of the global oil market has been threatened by the U.S. pumping out more shale oil than forecast. At the same time, there is less global demand than expected, as the global economic rebound in growth is slower than forecast.

Asked why speculation was back, el-Badri said "I have no idea."

'Relax': OPEC chief on falling oil price
'Relax': OPEC chief on falling oil price   

He warned of the dangers of more volatility, after three years of relative stability in the price of oil.

"We need a reasonable price where producers will not start nagging. At a reasonable price we can invest to produce more oil. With this price, we will not invest. Nobody will invest. If there is no more supply, the price will shoot up," he said.

ISIS is a problem: OPEC chief
ISIS is a problem: OPEC chief   

One factor which could cause the price of oil to rise quickly is the prospect of further trouble in the Middle East. In recent months, the emergence of terrorist group the Islamic State of Iraq and Syria (Isis) as a power in the region has raised alarm.

"I'm not a politician, but Isis is a problem, and this matter should be solved very quickly. This will affect existing production, it will affect investment, it will affect the behaviour of people. It will affect the area tremendously," el-Badri warned.

"We (the West and the Arab countries) are in the same situation. Don't tell me it is a Middle Eastern problem. It is a worldwide problem."

- By CNBC's Catherine Boyle