Dramatic changes are sweeping the oil and gas market.
8In the past, just a word from OPEC could send the oil markets into turmoil. The mere mention of a need to curtail output will send oil prices soaring to dizzying heights.
8Not any more.
8The unity of OPEC has since taken a dent after Saudi Arabia refused to allow OPEC to try to raise prices by pumping less crude, in the hope that a low price would drive competitors, especially America’s shale-oil producers, out of business.
8OPEC members are now fighting a grim battle among themselves and with other producers to carve out more market share. Saudi Arabia for example has fought with Russia and fellow OPEC members to sell oil to China. It has recently sought to displace Russian crude going into refineries in Sweden and Poland, and cut prices across Europe.
8The market now reacts to a different kind of news. Market move on news of an oil-workers’ strike in Brazil; cuts to Iraq’s investment budget; a Saudi bond issue that may enable it to withstand lower prices for longer.
8These kind of factors were never at play earlier but they are now.
8But beyond this, in the longer run, the cancellation of at least $150 billion of investments this year, with more cuts to come next year, will hurt supply.
8On the other hand, developing countries like India are showing record growth in use of hydrocarbons. Overall the IEA expects demand to grow by 1.9% this year, well above the average for the past decade, of 0.9%.
8But this demand-supply juxtaposition may not impact prices in the way it normally should.
8IEA predicted that a relatively sluggish recovery in demand and decline in supply would yield a price of $80 a barrel in 2020. But it also aired an alternative scenario in which oil stays in a range of $50-60 a barrel until well into the 2020s. One of the main reasons it hedged its bets is American shale oil, which has not been responding as promptly to changes in the price as analysts had assumed and has shown a surprising resilience so far.
For more details visit indianpetroplus.com
8In the past, just a word from OPEC could send the oil markets into turmoil. The mere mention of a need to curtail output will send oil prices soaring to dizzying heights.
8Not any more.
8The unity of OPEC has since taken a dent after Saudi Arabia refused to allow OPEC to try to raise prices by pumping less crude, in the hope that a low price would drive competitors, especially America’s shale-oil producers, out of business.
8OPEC members are now fighting a grim battle among themselves and with other producers to carve out more market share. Saudi Arabia for example has fought with Russia and fellow OPEC members to sell oil to China. It has recently sought to displace Russian crude going into refineries in Sweden and Poland, and cut prices across Europe.
8The market now reacts to a different kind of news. Market move on news of an oil-workers’ strike in Brazil; cuts to Iraq’s investment budget; a Saudi bond issue that may enable it to withstand lower prices for longer.
8These kind of factors were never at play earlier but they are now.
8But beyond this, in the longer run, the cancellation of at least $150 billion of investments this year, with more cuts to come next year, will hurt supply.
8On the other hand, developing countries like India are showing record growth in use of hydrocarbons. Overall the IEA expects demand to grow by 1.9% this year, well above the average for the past decade, of 0.9%.
8But this demand-supply juxtaposition may not impact prices in the way it normally should.
8IEA predicted that a relatively sluggish recovery in demand and decline in supply would yield a price of $80 a barrel in 2020. But it also aired an alternative scenario in which oil stays in a range of $50-60 a barrel until well into the 2020s. One of the main reasons it hedged its bets is American shale oil, which has not been responding as promptly to changes in the price as analysts had assumed and has shown a surprising resilience so far.
For more details visit indianpetroplus.com
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