Haider Al Lawati –
American energy companies began to increase the number of oil rigs for the 10th consecutive week in response to the recovery in oil prices since the recent agreement of the Organization of Petroleum Exporting Countries (Opec) in Geneva in November 2016.
Petroleum-exporting countries — members and non-members of Opec — adhered to this agreement, which aims to boost oil prices that have slumped since mid-2014. The oil price rise has led to some improvement in the budgets of oil-producing and exporting countries in the region that have recorded large deficits in their budgets over the past two years.
These nations have taken a number of measures to support the budgets allocated to produce and extract more oil and gas through new technologies as a result of the expected demand for conventional energy.
Some experts expect oil prices to exceed $60 a barrel in the second half of 2017, spurred by forecasts from the International Monetary Fund (IMF) and a number of major global banks of a high global economic growth (between 2.5 per cent and 3 per cent) this year.
Meanwhile, US president-elect Donald Trump is expected to keep the promises he made during the election campaign to allocate $500 billion for the renovation and maintenance of the US infrastructure, which will raise US demand for oil products in parallel to the growth of the American economy.
Both Indian and Chinese economies continued their demand for oil. They are on the verge of another growth surge in the next two years, leading to increased demand for oil and potential gradual increase in oil prices.
Experts believe the more oil production is reduced by Opec and non-member countries, the more difference it will make in the global supply, especially by countries such as Saudi Arabia, Russia, Iraq, UAE, Nigeria and Iran, given that some non-member countries have little effect on the desired reduction, but have a moral duty towards reduction and supporting oil prices.
Recently, oil prices rose on the back of news that Saudi Arabia cut its oil production by at least 486,000 barrels to 10.058 million barrels a day in compliance with the Opec agreement. Kuwait also complied by cutting oil production by 131,000 barrels to 2.707 million barrels a day.
A committee authorised to monitor implementation of the pact to curtail oil production is scheduled to meet in Vienna on January 21 and 22 to discuss the mechanism to monitor compliance with the agreement. Iraq also began to implement measures to reduce oil production as per the Opec decision, cutting its production to 3.250 million barrels — the first agreement of its kind since 2008.
No doubt the increase in shale oil production triggered by modern technologies will lead to slow movement in oil prices, translating into intense competition between traditional oil from Opec markets and non-traditional oil markets from North America.
Accordingly, American companies began to increase the number of rigs for the first time, surpassing that of last year.
Indications show US energy companies will increase their spending on drilling and pumping more oil and natural gas in the upcoming years amid expectations of a continued rise in energy prices.
As per the Opec agreement, the Sultanate announced a cut in production by 45,000 barrels a day, which constitutes about four per cent of the country’s daily output. Oil companies operating in the Sultanate are using technologies that help reduce the cost of oil extraction and create further employment for Omanis.
This is in addition to the country’s commitment to social responsibility to provide training for Omanis in various areas to be qualified to work in the available sectors.
Overall, the next period will see more oil developments and an increase in oil prices if all countries adhere to the Opec agreement.