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ENERGY NEWS
MIDDLE EAST Energy Review By Tsvetana Paraskova
Middle Eastern oil producers, with their continued production cuts as part of the OPEC+ deal, played a role in oil prices hitting in February 2021 the $60 per barrel mark for the first time in more than a year. OPEC, its key members from the Middle East, and the OPEC+ alliance with non-OPEC producers led by Russia are optimistic that the oil market is on its way to rebalancing and that global oil demand will rebound in the second half of the year.
While major producers in the Middle East continued to rein in oil supply in their attempt to tighten the market, the biggest companies in the region announced expansion projects and strategic agreements, while major international companies signed contracts with some of the national oil companies in the Gulf.
OPEC+ moves to tighten oil market The production cuts from OPEC and the broader OPEC+ alliance, plus the additional 1 million barrels per day (bpd) reduction in production from Saudi Arabia, the largest producer in the Middle East and the largest oil exporter in the world, have supported the crude oil price rally over the past two months. Prompt Brent and West Texas Intermediate prices exceeded the threshold of $60 a barrel in February while the futures curve in both Brent and the US benchmark fell deeper into backwardation, signalling a tightening market. “With the crude oil market currently switching into backwardation, we are hopeful that 2021 will be a good year for overall demand,” OPEC Secretary General Mohammad Barkindo said at the monthly meeting of the OPEC+ technical panel in early February. Barkindo opened the virtual meeting by highlighting the improving prospects for the global oil market and the global economy, which is expected to grow by 4.4% this year, compared to a decline of 4.1% in 2020. The Joint Ministerial Monitoring Committee (JMMC) of the OPEC+ group also expressed optimism that 2021 would be a year of recovery. Overall compliance of the OPEC+ alliance with the production cuts stood at 101% in December 2020, the committee said. “The Committee observed that, while economic prospects and oil demand would remain uncertain in the coming months, the gradual rollout of vaccines around the world is a positive factor for the rest of the year, boosting the global economy and oil demand,” the JMMC said. In its February Monthly Oil Market Report, OPEC reduced by 100,000 bpd its oil demand growth outlook for 2021 compared to the January report,
www.ogv.energy I March 2021
and now expects global demand to rise by 5.8 million bpd from 2020 to average 96.1 million bpd. The downward revision was mainly the result of extended lockdowns in major mature economies. “While the global economy is showing signs of a healthy recovery in 2021, oil demand is currently lagging, but is forecast to pick up in the 2H21,” OPEC said in its Monthly Oil Market Report in February.
With the crude oil market currently switching into backwardation, we are hopeful that 2021 will be a good year for overall demand, OPEC Secretary General Mohammad Barkindo said.
Qatar greenlights world’s biggest LNG project While the major oil producers in the Middle East are trying to tighten the market with the OPEC+ cuts, expecting a rebound in oil demand later this year, Qatar, which left OPEC in 2019, is doubling down on its major export commodity—liquefied natural gas (LNG). Qatar Petroleum announced on 8 February it had taken the final investment decision to build what it says would be the world’s biggest LNG project in terms of capacity. Qatar Petroleum sanctioned the development of the North Field East Project (NFE), which is expected to boost Qatar’s LNG production capacity from 77 million tonnes per annum (mmtpa) to 110 mmtpa. The project, scheduled to start production in the fourth quarter of 2025, will cost US$28.75 billion. The North Field East Project is likely to be the biggest project sanctioned across the global upstream business this year, Wood Mackenzie research director Giles Farrer said, commenting on the announcement. “Qatar is pursuing market share. This FID is likely to put pressure on other pre-FID LNG suppliers, who may find Qatar has secured a foothold in new markets,” Farrer added.
