Oil-Related Developments - February 2017

Two developments dominated the global oil scenario: the news of compliance with cuts in production by OPEC and non-OPEC members, and the surge in production of shale oil as a result of prices remaining at above $ 50/barrel in both the WTI and Brent indices: through the last fortnight, Brent was above $ 55, while WTI was above $ 50; on 14 February, Brent was $ 56.14 while WTI was $ 53.38. A report from the IEA said that compliance with cuts to the extent of 90% had been achieved by OPEC and non-OPEC members, with countries like Saudi Arabia cutting even more than was required. 

These prices have encouraged prospects of significant increases in shale oil production: US production has risen by 6.3% since July 2016 to nearly 9 mbd, and is expected to rise by a further 290,000 b/d in 2017. The Energy Information Administration (EIA) of the US department of energy has projected that in 2018 US production will be 9.53 mbd, the highest production since 1970. A study by energy consultants Wood Mackenzie has shown that breakeven prices of US shale oil wells has now become $ 70/barrel, as against $ 80-100 a few years ago.

While IEA has indicated that the global oil market could balance next year due to increase in demand, both Iran and Qatar have suggested OPEC and non-OPEC members may need to extend production cuts into the second half of 2016.

 

February 17, 2017

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About the Author

Ambassador Talmiz Ahmad joined the Indian Foreign Service in 1974. Early in his career, he was posted in a number of West Asian countries such as Kuwait, Iraq and Yemen and later, between 1987 and 1990, he was Consul General in Jeddah. He also held positions in the Indian missions in New York, London and Pretoria. He served as Indian Ambassador to Saudi Arabia (2000-03; 2010-11); Oman (2003-04), and the UAE (2007-10). He was also Additional Secretary for International Cooperation in the Ministry of Petroleum and Natural Gas in 2004-06. In July 2011, the Saudi Government conferred on him the King Abdul Aziz Medal First Class for his contribution to the promotion of Indo – Saudi relations. After retirement from the Foreign Service in 2011, he worked in the corporate sector in Dubai for three years. He is now a full-time academic and holds the Ram Sathe Chair for International Studies, Symbiosis International University. He has published three books: Reform in the Arab World: External Influences and Regional Debates (2005), Children of Abraham at War: the Clash of Messianic Militarisms (2010), and The Islamist Challenge in West Asia: Doctrinal and Political Competitions after the Arab Spring (2013). He writes and lectures frequently on Political Islam, the politics and economics of West Asia and the Indian Ocean and energy security issues.