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ENERGY NEWS
MIDDLE EAST Energy Review By Tsvetana Paraskova
The surprise decision of the OPEC+ alliance in early March and a flurry of oil and gas contracts and strategic agreements signed by some of the biggest companies in the Middle East were the key developments in oil and gas in the region this past month.
OPEC+ Surprises Oil Market
Oil Prices Spike
OPEC and its non-OPEC partners led by Russia decided on 4 March to keep their collective oil production nearly flat in April, compared to March. The ministers of the OPEC+ group decided to roll over the production levels of March for the month of April, with the exception of Russia and Kazakhstan, which will be allowed to increase production by 130,000 barrels per day (bpd) and 20,000 bpd respectively, due to continued seasonal consumption patterns. In addition, Saudi Arabia will keep its unilateral extra cut of 1 million bpd into April, although it had initially said the additional cut would only last for February and March.
As a result of the OPEC+ decision, oil prices rallied amid expectations of even tighter oil market going forward. Brent oil prices even hit $70 a barrel on 8 March, for the first time since the pandemic started, after Saudi Arabia said the previous day there was an attempt to target the Ras Tanura Port, one of the world’s largest oil shipping ports.
The OPEC+ decision to basically roll over the 7-million-bpd cut into April and the extra Saudi cut took the oil market by surprise, as most analysts and forecasters had expected easing of the cuts by as much as 500,000 bpd and Saudi Arabia reversing the additional reduction. “OPEC+ took the market by surprise today when it decided to roll over its quota, saying that rather than anticipate a demand recovery, the group would wait to see it actually recover,” Ann-Louise Hittle, vice president, Macro Oils, at Wood Mackenzie, said, commenting on the decision. “If OPEC+ does not increase output in April, except the small amounts for Russia and Kazakhstan, the stock draw will be significantly more than 1 million b/d next month, as the summer demand season looms. We expect oil prices to rise toward $70-$75 per barrel during April,” WoodMac said.
www.ogv.energy I April 2021
The Middle East will be likely to lead shelf developments with 40% of the total value as global offshore commitments are poised for a record recovery through 2025, Rystad Energy said in a report in early March.
However, analysts and major oil-importing countries such as India have started to warn that high oil prices could stall the still fragile global oil demand recovery. India is outright saying that oil prices nearing $70 could undermine the consumer-led recovery in demand, as petrol and diesel prices in the world’s third-largest oil importer hit record highs at the end of February. According to WoodMac’s Hittle: “The risk is these higher prices will dampen the tentative global recovery. But the Saudi Energy Minister, Prince Abdulaziz, is adamant OPEC+ must watch for concrete signs of a demand rise before he moves on production.”
Middle East Set To Lead Shelf Developments The Middle East will be likely to lead shelf developments with 40% of the total value as global offshore commitments are poised for a record recovery through 2025, Rystad Energy said in a report in early March. For the purpose of the analysis, Rystad Energy has defined that a project is committed when more than 25% of its overall greenfield capital expenditure (CapEx) is awarded through contracts.
