The emirate's Roads and Transport Authority completed the construction of a network of main roads with a total length of 9.5 km
"Tension in the Middle East and Nigerian oil supply worries were instrumental in keeping prices on the boil, but peace in the Lebanon and a less confrontational Iran seems to have acted as a catalyst, soothing frayed nerves and opening the door for weak fundamentals to come to the fore," the report states.
The report addresses the big question of whether the oil price will rebound, stay around $60 a barrel, or decline further? In the last few days oil prices fell to a new six-month low, to just over $59 a barrel, as news of BP restoring output at Prudhoe Bay added to a sense of healthy global supplies. The CGES forecasts that the likelihood of an increase in global supplies will continue to dampen prices. It also believes that unless Opec manages to increase its output, prices will decline even more.
CGES says that the most important factor determining whether output will be reduced is whether Opec members share the burden of cuts, "otherwise Saudi Arabia will have to go it alone". The report states: "The Kingdom has been quietly allowing its output to be trimmed lately by refusing to increase the discounts on its heavy crude, but the cuts needed hence forth are deeper."
The CGES view is that to keep Dated Brent around $60 a barrel over the winter, Opec's output needs to be reduced to 29.4 million barrels per day (mbpd) in the last quarter of the year and 29 mbpd in the first quarter of 2007. The centre believes that Saudi Arabia will call on the help of other members to make production cuts but that Venezuela, Iran, Iraq, Nigeria and Indonesia are likely to turn a deaf ear, while Algeria and Libya are likely to promise to join in but not actually deliver. "Forcing the others to cut could lead to a price collapse, so the Saudis will probably continue to let their output decline slowly until the pressure proves too great," it states.
The report also notes that demand for oil has been lower than expected. Last month the CGES revised downwards its estimates of annual global demand growth to 0.9 mbpd or 1.1 per cent. On the supply side, it states that long awaited additions to non-Opec output have finally started to appear and the CGES now expects 0.8 mbpd of extra production in the final quarter of 2006 and a further 0.6 mbpd in the first quarter of 2007.
The likelihood of a warm winter, barring any expected disruptions in supply, is also expected to mean no significant stock-draw in the final quarter of 2007 and a mere 0.3 mbpd to be withdrawn from inventories in the first quarter of 2007. "As a result prices may slide over the coming months unless Opec agrees to cut its output accordingly," the report states, but adds, "This will be difficult."
CGES also states that with the setbacks and delays of new non-Opec production coming on stream "we are now a little more optimistic about forthcoming production, expecting growth of around 1.25 mbpd over the coming years. This will provide Opec with competition on the supply side and help balance the global oil market." Other forecasts, such as those from the International Energy Agency (IEA), are forecasting incremental non-Opec supplies to be even higher, in this case 1.8mbpd.
If a scenario were to occur where there was greater supply growth it is possible that oil prices could weaken to below $50 a barrel by the third quarter of 2007, the CGES believes. "By then, the Opec basket will be around $45 a barrel — a price that is likely to take active steps to prevent occurring," it states.
The CGES believes that for high oil prices to continue its upward trend several factors are required: tight fundamentals, heightened geopolitical tension, cold weather and underperforming non-Opec supply. But it also states there is an outside chance that demand growth will pick up. However, if this were to combine with a lower level of non-Opec supplies, oil prices could rise to between $65 and $70 a barrel.
The report also notes that fuel oil demand is falling as high prices encourage substitution. At the end of July, fuel oil inventories in the US, EU, Japan, South Korea and Singapore were at the highest level since June 2001 after a 15 million barrel build this year. And the high margins that were being enjoyed by refiners on light and middle distillates are also collapsing as supply increases, especially in the US.
The emirate's Roads and Transport Authority completed the construction of a network of main roads with a total length of 9.5 km
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