Oil poised to recover in 2016, predict experts

Dubai - Energy experts at the Euromoney Qatar Conference argued that oil supply continued to fall as less economically viable projects are postponed and cancelled.

Given the current plunge in the global supply of oil, energy analysts expect demand will outstrip supply as early as April 2016, leading to a recovery in oil prices that have been plummeting as much as 60 per cent over the past several months.
Energy experts at the Euromoney Qatar Conference argued that oil supply continued to fall as less economically viable projects are postponed and cancelled.
For example, the US rig count (the number of rigs searching for oil and gas) declined to the lowest level since 1999 in December, with 737 rigs engaged in exploration and production - less than half the 2014 level of 1,920. Given the current dip on the supply side, global oil demand will outstrip supply as early as April 2016, leading to a recovery in oil prices, analysts predicted.
In the Energy Strategy session, speakers focused on falling demand from industrial powerhouses around the world, such as China and the Brics, which has driven oil prices down in 2015.
According to experts, global investment in exploration and production has fallen from $700 billion last year to $550 billion this year. With US crude prices having slid below $40 per barrel again, investment will sink even further in 2016. US shale output declines are projected to account for 400,000 barrels per day of an anticipated 500,000 bpd drop in non-Opec production.
The International Energy Agency, or IEA, expects oil prices to remain low through 2016, but forecasts a rebound to begin in 2017 as the current oil glut recedes and demand rises.
The low price of oil has led the energy industry to slash investments in drilling and exploration, which could lead to a tighter supply. Oil companies have cut such spending by about 20 per cent so far this year, and may spend even less in 2016.
The spending decline, combined with continued growth in demand, eventually could lead to "some surprises" in pricing, the IEA said.
However, with global demand expected to remain weak in the first half of next year, senior executives from leading asset managers and energy companies agreed that the disruption of the last 15 months is likely to continue.
Experts predicted that the gas market would also likely to begin to recover in 2016, as nations around the world look to reduce emissions and introduce cleaner energy sources. Gas demand globally has grown at a better rate than oil in recent years - averaging 2.5 per cent - and is likely to increase as more nations look to phase out coal and other "dirty" fossil fuels.
"As a result, the longer term picture is positive for nations like Qatar and other energy producers in the GCC, given their long-term investments in the sector and their status as low-cost producers," energy experts observed.
A new wave of disruptive technology and ongoing instability in energy markets are likely to be two of the dominant trends affecting the global economy in 2016, according to experts at the Euromoney conference.
The two key issues were examined in panel discussions during the second day of the event. On the 'Technology and Finance' panel, senior executives from Hive Technology, FinTechStage, Qatar National Bank and Visa outlined some of the innovations that are impacting the financial sector, as well as the challenges preventing institutions from fully realising the benefits of these technologies.
One area that is likely to generate significant disruption is the move towards mobile and online payments, and the wider social shift to a "cashless society". In the GCC region, where 90 per cent of retail transactions are still conducted in cash, the adoption of more cashless payment channels is likely to have a transformative effect.
- issacjohn@khaleejtimes.com

• MENA