OIL MARKET DEFICIT
PLATTS - The world could run short of oil by 2020 due to the recent sharp global downturn in upstream investment, Saudi Energy Minister Khalid al-Falih said Thursday.
"From what I can see, within two to three years there will be tightness because many projects have been deferred and delayed," Falih told delegates at the Atlantic Council Global Energy Forum in Abu Dhabi.
Increasing the likelihood of a medium-term swing towards tight oil supply was the "not insignificant" natural decline in output from large, mature fields in the Middle East and elsewhere, he added.
For the coming year, Falih said there were too many variables at play for him to predict market trends. However, he said he broadly expected global oil demand to continue growing while production from mature basins declined.
"Uncertainty about the future has impacted investment levels and jobs in the industry, which is of particular concern to me. The good news is that we are moving towards a rebalanced market, too slowly for my liking. But the even better news is that the pace of re-balancing will be accelerated by the recent agreements," he said, referring to OPEC's late November agreement to cut output by 1.2 million b/d in the first half of 2017 and the group's subsequent deal with 11 oil producers from outside OPEC under which the non-OPEC countries agreed to cut by roughly a further aggregate 600,000 b/d.
Falih said near-term uncertainty over oil supply -- including the extent of an ongoing rebound in US shale oil production -- was the reason for the limited duration of the OPEC deal.
"The agreement is for six months for the specific reason that we don't know what will happen by mid-year; and then we will consider renewing it," he said.
Falih stressed that ongoing cooperation between Russia and Saudi Arabia, the world's two biggest oil exporters, would be crucial for reducing oil market volatility and therefore uncertainty over future oil supply.
"Our collaboration and cooperation for the long term is essential for stability," he said. "If there is a need to bring non-OPEC countries with OPEC [in sustaining production cuts] in the second half of 2017, the Russian-Saudi relationship will continue, as it has before, to play a key part."
Falih said Saudi Arabia was seeking a middle path for oil prices after triple-digit prices had proved unsustainable, as had the prices below $30/b reached early last year.
"We want to reduce volatility; we cannot eliminate it," he said.
DE-LINKING ECONOMY FROM OIL PRICES
Under its Saudi Arabia Vision 2030 master-plan for economic reform, OPEC's biggest oil producer is seeking to de-link its economy from oil prices.
"We want to do it sooner [rather] than later," Falih said.
Discussing a number of issues related the Saudi government plan for achieving economic stability, including a drive to privatize state assets, Falih said the planned initial public offering of up to 5% of Saudi Aramco was still expected in 2018.
The kingdom's currently state-owned power sector would also be restructured, with power transmission and generation functions to be separated and all future generation to be undertaken by the private sector, he said.
Even the Saudi Stock Exchange, Tadawul, was to be opened to private investment, with a share-listing planned for 2018, along with longer term plans for air and seaports.
"We must move on multiple fronts and do it now," said Falih, a key adviser to Saudi Deputy Crown Prince Mohammed bin Salman on the economic reform plan.
A key initiative in a plan to eliminate by 2020 the Saudi state budget deficit, which emerged following the latest oil price crash, would be the introduction next year of a value-added tax on domestic sales of goods and services, Falih confirmed.
Another notable Saudi budget-reduction measure introduced last year was an abrupt decision to slash state subsidies on domestic fuel and electricity supplies.
Reforms to energy prices introduced in early 2016 --increasing transport fuel prices by 50%, along with electricity and gas prices rises --have already had an impact. Saudi energy demand grew by only 0.5% last year, having grown at around 5% for the last few years, Falih said.
Further reforms to energy subsidies are expected in the coming years as Falih stressed the need for rapid and far reaching reform, including economic diversification.
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GAZPROM - The parties discussed relevant issues related to bilateral cooperation, including the Baltic LNG project. Emphasis was placed on the priority measures aimed at developing a joint design concept (pre-FEED).
BHGE - U.S. Rig Count is up 11 rigs from last week to 1,063, with oil rigs up 8 to 869, gas rigs up 4 to 193, and miscellaneous rigs down 1 to 1. Canada Rig Count is up 13 rigs from last week to 195, with oil rigs up 8 to 127 and gas rigs up 5 to 68.
REUTERS - Brent crude futures had risen $1.02 cents, or 1.3 percent, to $81.28 a barrel by 0637 GMT. The contract dropped 3.4 percent on Thursday following sharp falls in equity markets and indications that supply concerns have been overblown. U.S. West Texas Intermediate (WTI) crude futures were up 80 cents, or 1.1 percent, at $71.77 a barrel, after a 3 percent fall in the previous session. WTI is on track for a 3.5 percent drop this week.
EIA - Brent crude oil spot prices averaged $79 per barrel (b) in September, up $6/b from August. EIA expects Brent spot prices will average $74/b in 2018 and $75/b in 2019. EIA expects West Texas Intermediate (WTI) crude oil prices will average about $6/b lower than Brent prices in 2018 and in 2019.