Opec expects a brighter outlook for the oil market as the low prices of the past year bite further into higher-cost production growth, and with demand forecast to pick up in coming months. Opec's Vienna-based think tank said in its monthly oil market report yesterday that the factors that have been weighing on the market "are showing signs of alleviation".
The main cause for optimism is the sharp slowdown in growth from producers outside Opec, particularly in North America. The report points out that “the oil industry has experienced a rapid fall in global upstream spending, down by more than 20 per cent, with North America cutting as much as 35 per cent. This has led to lower activity – less drilling and the delay or cancellation of new projects – which has put pressure on production growth”.
Oil production in North America grew last year by more than 1.9 million barrels per day, which had slowed to 1.8 million bpd in the first half of this year.
But according to preliminary Opec figures, that growth had dropped to just 420,000 bpd in the third quarter of this year, with shale oil (or tight oil) producers particularly hit.
“Smaller operators active in tight oil have been particularly affected by low prices, as they are usually pressed for cash,” Opec reports.
“Accessing credit has become more challenging as the decline in oil prices has diminished the value of companies’ collateral,” accelerating the slowdown in production growth.
The low oil price will continue to cut into investment across the board, Opec predicts, with slowdowns in Africa, Russia and elsewhere, as well as a continued drop in North America. Opec forecast a decline in overall North American production in the last three months of this year as well as next year, bringing an oversupplied oil market into balance next year.
"The increase in non-Opec supply last year was more than twice that of global oil demand growth," Opec's report notes. But "this relationship is expected to flip this year before widening further in 2016 so that world oil demand growth exceeds the change in non-Opec supply".
The upbeat outlook had been foreshadowed by Opec’s secretary general, Abdalla El Badri. At a conference in Kuwait on Sunday he said: “We have recently seen a contraction in production from some non-Opec producers and an uptick in demand growth. We are hopeful that the industry will see a more balanced oil market in 2016.”
Qatar’s minister for energy, Mohammed Al Sada, also echoed the Opec report, saying there had been a substantial fall in industry investment, even warning that “this trend of reducing investment in the oil industry could result in production shortfalls down the line”.
The turnaround in market sentiment has been building since oil prices hit a six-year low at the end of August, when the world benchmark North Sea Brent futures hovered just above US$37 per barrel. Brent was trading at about $53 per barrel in the latest session.
“Just a few weeks ago, the view that low oil prices are here to stay was the dominant one,” said Amrita Sen, an oil market analyst at Energy Aspects in Singapore.
“Expectations were for 2016 to be yet another depressed year with prices perhaps averaging less than $50 per barrel,” she said.
“But now, oil prices have started to find some momentum, and rightly so given the accelerated declines in US production and the big cuts in [capital spending] across the industry affecting expectations about future supplies.
“Risks of another plunge lower in prices are diminishing as the rebalancing process continues in earnest,” Ms Sen concluded.
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COMPANY PROFILE
Name: Almnssa
Started: August 2020
Founder: Areej Selmi
Based: Gaza
Sectors: Internet, e-commerce
Investments: Grants/private funding
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COMPANY%20PROFILE%20
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How to protect yourself when air quality drops
Install an air filter in your home.
Close your windows and turn on the AC.
Shower or bath after being outside.
Wear a face mask.
Stay indoors when conditions are particularly poor.
If driving, turn your engine off when stationary.
F1 2020 calendar
March 15 - Australia, Melbourne; March 22 - Bahrain, Sakhir; April 5 - Vietnam, Hanoi; April 19 - China, Shanghai; May 3 - Netherlands, Zandvoort; May 20 - Spain, Barcelona; May 24 - Monaco, Monaco; June 7 - Azerbaijan, Baku; June 14 - Canada, Montreal; June 28 - France, Le Castellet; July 5 - Austria, Spielberg; July 19 - Great Britain, Silverstone; August 2 - Hungary, Budapest; August 30 - Belgium, Spa; September 6 - Italy, Monza; September 20 - Singapore, Singapore; September 27 - Russia, Sochi; October 11 - Japan, Suzuka; October 25 - United States, Austin; November 1 - Mexico City, Mexico City; November 15 - Brazil, Sao Paulo; November 29 - Abu Dhabi, Abu Dhabi.
Racecard
6.35pm: American Business Council – Maiden (PA) Dh80,000 (Dirt) 1,600m
7.10pm: British Business Group – Maiden (TB) Dh82,500 (D) 1,200m
7.45pm: CCI France UAE – Handicap (TB) Dh87,500 (D) 1,400m
8.20pm: Czech Business Council – Rated Conditions (TB) Dh105,000 (D) 1,400m
8.55pm: Netherlands Business Council – Rated Conditions (TB) Dh95,000 (D) 1,600m
9.30pm: Indian Business and Professional Council – Handicap (TB) Dh95,000 (D) 1,200m
COMPANY PROFILE
Name: HyperSpace
Started: 2020
Founders: Alexander Heller, Rama Allen and Desi Gonzalez
Based: Dubai, UAE
Sector: Entertainment
Number of staff: 210
Investment raised: $75 million from investors including Galaxy Interactive, Riyadh Season, Sega Ventures and Apis Venture Partners
FIXTURES
Nov 04-05: v Western Australia XI, Perth
Nov 08-11: v Cricket Australia XI, Adelaide
Nov 15-18 v Cricket Australia XI, Townsville (d/n)
Nov 23-27: 1ST TEST v AUSTRALIA, Brisbane
Dec 02-06: 2ND TEST v AUSTRALIA, Adelaide (d/n)
Dec 09-10: v Cricket Australia XI, Perth
Dec 14-18: 3RD TEST v AUSTRALIA, Perth
Dec 26-30 4TH TEST v AUSTRALIA, Melbourne
Jan 04-08: 5TH TEST v AUSTRALIA, Sydney
Note: d/n = day/night
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Company%20Profile
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Moon Music
Artist: Coldplay
Label: Parlophone/Atlantic
Number of tracks: 10
Rating: 3/5