Oil prices have slightly increased since Saudi Arabia Energy Minister’s agreement with OPEC that the global market is finally heading towards a balance, with prices beginning to settle.
Brent crude futures are trading at $50.60 per barrel, while US crude is trading at $49.21, and supply and demand reaching a balance worldwide, although it is hard to tell whether crude has fully stabilised.
“However, 2017 represents a major threat to any oil price recovery. DW predicts offshore oil output will increase by 1.8 million barrels per day in 2017 as a result of the implementation of projects sanctioned before the downturn,” Douglas-Westwood’s Matt Cook said, in his report World Drilling and Production Market Forecast (DWD&P).
Crude Oil Prices Stabilise
“This will probably lead to an increase in the oversupply and suppression of oil prices. Once this backlog of projects is cleared, a reduction in offshore activity is expected – particularly in deep water plays,” he added.
The expert went on to say that the outlook on deep water drilling has again been downgraded as a consequence of the sustained downturn and the agency does not expect any significant recovery in activity before 2020.
“This will contribute to offshore production expected to peak in 2021 due to a lack of projects in the near-term,” Cook explained.
Supply Outages Cause Price Hike
The author blamed the rally in oil prices on outages in Canada and Nigeria, as well as a downfall in production onshore the US caused by bankruptcies and Capex cuts among shale producers.
“As such”, he said, “we anticipate the first decline in onshore oil production since 2009”.
The hike in prices is also a result of the latest militant attacks in the Niger Delta, which have led to a collapse in Nigerian crude oil production, although the state oil company NNPC has released statements announcing that production is getting back to its normal rates.