The Oil Market Outlook
The global oil markets making headway due to the higher oil prices is anticipated to remain in place for this year and next to supply the growing demand globally.
The world economy is improving, growth rates are increasing and the positive momentum is likely to continue in 2018. Growth in the Middle East and North Africa region is expected to increase to 2.9% in 2018 from 2.1% in 2017, presuming proactive security measures and moderation of geopolitical tensions. A spike in oil prices could be seen sometime in the next 5-10 years.
The global oil demand consumption for the second quarter of 2017 surpassed expectations. A great deal of the activity was focused on OECD countries, particularly in Europe and the US. The OPEC region and China as well registered higher-than-expected growth in oil demand.
The International Energy Agency (IEA) has revised its global oil demand growth estimates to 1.6 mb/d in 2017. The global oil demand now stands at 97.7 mb/d for 2017, representing an upward correction. The forecast for 2018 is 99.1 mb/d, which is to be achieved with continued discipline, says IEA.
In the Middle East, M&A deals in oil & gas sector will begin to rise aggressively, particularly as companies recognize the need to replenish reserves and secure access in international markets. Private equity is likely to have a bigger role to play in the industry in coming years.
Companies in the Gulf are seeking new ways to collaborate to leverage their skill sets. Technology is to be acquired through partnerships. This will result in the emergence of a number of new operating models until 2020, built around specific capabilities like onshore unconventional production and exploration in remote environments.
The capital expenditure of global oil and gas companies is projected to increase by as much as 7% in 2017, which was slashed by about 40% between 2014 and 2016 during the oil price collapse.
The oil and gas sector is highly volatile and is strongly influenced by multiple factors like supply and demand, prices, sustainability, technological advances, conflicts and geopolitical disputes. Positive economic trends are seen in the industry with converging oil price expectations of investors and companies.
Even though the industry is seeing the green shoots of recovery, it must move gingerly to deliver the next wave of growth plans for sustainable returns and weather any challenges the future brings.