2017 to present oversupply and compliance issues for Oil
|2016 turned out to be a pretty good year for the oil price and the end year comparisons dont tell the whole story about the lows in January and February. WTI ended up with a gain of $16.68, +45% whilst Brent rose $18.85 or 52%. This mornings price are better again, WTI is $54.99 and the new Brent contract is trading at $58.10.
If you look at the efficiencies that the industry has made in the last couple of years then the improvement in margins, even since $115 oil, must be meaningful. Some companies have even benefited from the strength of the dollar, no surprise that BP through word and deed has declared the worst over.
2017 will present obstacles such as compliance and oversupply, at least in the first half but as the year rolls on should get better. Demand should exceed supply as we get into the second half of the year, this will encourage adherence to quotas as monthly cheques get fatter. Also the now, $1.5tn of capex cuts, will start to bite and will last for 4-5 years, even the US shale industry wont be able to fill that gap. With BP leading the way, by encouraging partners at Mad Dog 2 to go ahead with a budget slimmed from over $20bn down to sub $10bn, it has seen the writing on the wall but meaningful production here is unlikely before 2022 even with instant approval.
Who knows, Saudi taking up any cheater’s slack this year might prove to be very profitable down the line…And as for demand, if you had any serious pick up from China or India or others, who knows what might happen…
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.