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Business / Qatar Business

Oil to average in $50s this year: GI survey

Published: 13 Jan 2017 - 09:15 pm | Last Updated: 17 Nov 2021 - 09:22 pm
United Arab Emirates Energy Minister Suhail bin Mohamed al-Mazroui (right), speaks during the 7th Gulf Intelligence UAE Energy Forum meeting in Abu Dhabi.

United Arab Emirates Energy Minister Suhail bin Mohamed al-Mazroui (right), speaks during the 7th Gulf Intelligence UAE Energy Forum meeting in Abu Dhabi.

The Peninsula

The average Brent oil price will be in the $50s/bl this year,  nearly half of the industry experts participatedf in a Gulf Intelligence survey believe.  Of the total 250 regional and international energy professtionals who took part in the GIQ's energy Industry Survey, 49 percent  said the Brent prices will average in $50s.
Comparatively, nearly a third (29 percent) expect the average oil price to be in the $60s/bl, which is a major turnaround from this time last year when prices dipped below $30/bl and hit a 12-year low.
The relatively bullish sentiment is supported by the International Energy Agency’s (IEA) forecast that global oil supply will move into a 600,000 b/d deficit by June if Opec and non- OPEC producers sustain the supply cuts that were agreed in late-2016. Some respondents (16 percent) clearly have their doubts on whether the deal will hold and expect the average price to be in the $40s/bl.  
59 percent of survey respondents believed prices would not dip below $40/bbl and a similar percentage said they would not rise beyond the $60s/bl. Almost a third of the audience (28 percent) were however more bullish, expecting that the highest prices hit may be in the $70s/bbl.  
The majority (74 percent) of respondents said Opec's recent agreement to cut supply alongside non- OPEC producers – the first such deal in 15 years – represents Opec's flag of surrender after a two-year fight for market share. Some oil producers however, such as the UAE, have countered that opinion, emphasising that the supply cuts, which should lead to a higher oil price, are targeted at bolstering investment into the energy sector, which has witnessed a drop for the past three years along with oil price erosion. Wood Mackenzie released a report this week saying that it expects investment in exploration and production worldwide to rise by 2% in 2017 to $450bn.     
But, energy investments do not only rely on OPEC and non-Opec producers’ ability to stick to the rulebook – the political scene will also have a major impact in 2017. In a recent report, the Eurasia Group said that 2017 marks the most volatile political risk environment since the second World War.
Given three political risk choices to rank in the survey, most GI  respondents (65percent) said that US President Elect Trump’s ‘America First’ philosophy would have the biggest ramifications on the global energy industry.  Nearly a third (27 percent) said the likely overreaction by China to geopolitical events ahead of its 19th Community Party Congress leadership shuffle in September, will have the most significant impact on energy dynamics.  
On a longer-term basis, 48 percent of respondents expect it to be sometime in 2018 before the inventories of crude and refined oil in industrialized nations  to be cleared.
A fifth (21 percent) of respondents said late-2017 is more likely, while another fifth expect it to be in 2019. As with the respondents’ price forecasts, their expectations for supply are within a relatively defined range.