Oil-related Developments - February 2018

The fall in the value of the dollar has boosted oil prices: on 23 January, Brent crude traded at $69.41 a barrel, up 0.54 percent, while WTI crude was at $63.89, up 0.5 percent. Later, on 29 January, WTI crude traded above $66 a barrel, the highest since December 2014. Thanks to shale oil, US crude oil production is poised to break records by surpassing 10m barrels a day in 2018. The country’s net imports of crude oil and petroleum products fell below 2.5m b/d late last year, the lowest since the early 1970s.

The growth in world economy identified by the IMF and others has had a positive effect on oil prices as fuel consumption rises: world oil demand will reach 99.1m b/d this year, up 1.3m b/d on last year, the International Energy Agency estimates. Bank of America projects average prices of $60 a barrel for WTI and $64 for Brent in 2018.

At Davos, Saudi energy minister Khalid al Falih said he remained concerned about the market situation: "I'm still anxious about the fragility of the market (and) about the potential black swans that may spring in front of us. By and large, we are on our way, but we are not there yet."

The minister urged global oil producers to extend their cooperation beyond 2018. He also raised the possibility of a new form of agreement rather than continuing with the same level of production cuts. He added:” "I think there is an acceptance that we need to extend this framework of OPEC and non-OPEC cooperation, in one way or another, beyond the current agreement."

The current deal, struck by OPEC and 10 other allied producers, is scheduled to last throughout the calendar year. It is thought to have supported the recent oil price rally and helped to clear a global supply overhang. Robust demand in China, India and the U.S. — as well as the ongoing production cuts from OPEC and its allied producers — could help to rebalance the oil market this year.

 

February 1, 2018

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About the Author

Ambassador Talmiz Ahmed

Former Ambassador of India to Saudia Arabia, Oman and UAE, monitors developments in the West Asian region.  

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.