EMEA News
Saudis See Oil Cuts Easing in 2019, While UK Becomes Latest Nation to Announce Production Hike
In stating that the current crude market has regained equilibrium enough to consider a relaxing of production output curbs, Khalid al-Falih, energy minister for Saudi Arabia, also pointed out over the weekend that a mechanism to curb supply should be incorporated into a permanent framework with other producers.
Al-Falih's implication that the market could easily go south again is timely given surprising news out of the U.K. that for all the talk about aging oil fields, that nation is about to become a net crude oil exporter for the first time in 14 years.
According to JBC Energy GmbH, new projects in the North Sea coming on stream this year will increase the U.K.'s crude output above 1 million barrels a day, and that on a net trade basis this amount will soon allow overseas sales to overtake imports.
Although of course this is a drop in the bucket compared to powerhouse output elsewhere in the world, it demonstrates how quickly a country whose crude industry was thought to have been in permanent decline can stage a comeback - and it also reinforces the notion that western nations, along with many OPEC members, are eager to extend their production capabilities regardless of the shaky global supply and demand balance.
Another country eager to boost production, albeit lacking the economic wherewithal to do so, is Venezuela: president Nicolas Maduro over the weekend once again took to the state-controlled airwaves to promise viewers that "I think that in the first half of this year, we will have recovered 70 percent of production."
Venezuela's oil production dropped by nearly 13 percent last year, a 28-year low.
For the record, al-Falih foresees a monitoring mechanism not too far removed from the one that currently governs the OPEC cuts: "What we want is an evergreen framework that brings producers from OPEC and non-OPEC (countries) together in a market monitoring fashion that allows us to take quick decisions.
"I think everybody has learned, producers as well as consumers, that a market without a steering wheel is very destructive, very damaging to the interests of all."
But as far as Francisco Blanch, head of commodities and derivative research at Bank of America, is concerned, we have two years of breathing room before a significant change in the crude market could render al-Falih's plan of global monitoring obsolete.
He told Bloomberg television on Monday that oil demand will remain strong through at least 2020, pushing spot costs for crude above futures pricing.
After that, Blanch expects electric vehicles to begin to make a substantial dent in crude demand, led by countries like China in its quest for cleaner fuels; he speculated that the price of such vehicles could be comparable with internal combustion engine vehicles in as little as four years.
It's unclear whether Blanch's prediction of strong demand will be powerful enough to withstand the onslaught of U.S. shale, which OCBC Bank last week said has rendered the market vulnerable to "ballooning supplies" and could cause prices to drop below $60.
