By Satish Kanady
DOHA: A top energy leader from Saudi Arabia yesterday held market commentators and ‘conspiracy’ theory hatched by a section of market analysts partially responsible for the current mess in energy market.
Participating in a panel discussion on “Energy Outlook” on the opening day of “2015 IIF Spring Membership Meeting” here , Ibrahim Al Muhanna, Adviser to the Minister of Petroleum, Ministry of Petroleum and Mineral Affairs, Saudi Arabia said : “It is the conspiracy theory that brought the oil price down. Saudi Arabia is not in a price war with anybody. Commentators have confused the market.”
“Saudi is committed to stable price and stable supply and for a balanced market. We do not make knee-jerk reactions to “conspiracies”.
Al Muhanna said he was optimistic and confident that the demand will be stronger going forward. “We have seen that this since October last..Oil is long-term business and it requires long-term investor confidence.”
He said Global economy will continue to strengthen and demand will increase. The only exception may be Europe.
Paul Horsnell, Global Head, Commodities Research, Standard Chartered said the market is currently feeling heavy. At least 5 million barrel US shale is entering the market per day. US Shale can’t grow at this level . The supply will come to an end relatively quick.
He said: “We are living through an experimental stage in US Shale..Cost of Shale well has come down significantly to $12m. Industry is waiting for further drop in the cost of Shale well. At the moment, the developing) some 3000 well are not completed.”
How main producers are positioning themselves in the market at a time when shale floods the market is important before us making the forecasts for mid-term, he said.
Edward Morse, Managing Director Global Head-Commodities, Citi Research is bearish in the short term. The inventories situation in the US is growing one million barrel per day. The US is expecting around the same level of production of OPEC countries.
“The inventories building in the US will continue. US gas production has increased by 40 percent..This will push the price down $35 to $30 levels”. He said the Citi is bearish on second quarter. “ Look at the main Emerging Markets, China is disappointing. Turkey and Brazil are languishing.”
Edward said the year 2016 middle may see a one percent decrease in the production rate. It could stabilise the market to a certain levels. There are problems in Nigeria, Columbia and Venezuela. “ The market will balance but not before the latter part of 2016”
We are expecting a phenomenal drop in China. We have a top down approach in Emerging Market , the demand is going to be challenged. The mid-term outlook will be price determinant.
On the gas spot market he said there will be structural change in the market. The global gas market is flooded. The US and Australia are coming online in a big way. The US production will be really different in terms of destination. It will go wherever there is demand.“Pipeline gas is key. 100 million tone is coming online this year alone”.
“Be it production target, market balancing or production policy, geopolitical issues is key while analyzing the energy market. Iraq, from where the major share of OPEC production coming from, is a big question mark. There is low level of investments in many producing countries”, said Kate Dourian, Senior Editor, MEES.
The Peninsula
