Oil price slump should not stop investment: Saudi

Oil prices have slumped by more than 50 percent since the middle of a year ago amid a worldwide supply glut, prompting the cancellation of a string of major investment projects.

MANAMA-Global oil demand is expected to grow by an average of more than one million barrels a day annually and the oil industry needs around five million barrels a day of additional crude output capacity to keep up with demand, Saudi Arabia’s oil minister Ali al-Naimi said Thursday.

Bank of America-Merrill Lynch said it expected the Chinese yuan to depreciate next year to reach 6.90 versus the Greenback, adding to the selling pressure on the commodity space. It goes on to say that, while it is “a lot easier politically” to deliver a modest crude-supply cut than to implement a full-blown currency devaluation, a sharp move lower for the yuan, “could ultimately force Saudi’s hand”.

In early trading on Friday, Brent crude was hovering around US$44 with WTI back, just above US$40 a barrel.

During the last 40 years, APICORP actively served the Arab energy sector by funding and equity financing a large number of distinctive energy projects, especially the Arab joint ventures of OAPEC member states, in addition to the provision of financial advisory services and energy research, and the active participation in, and full support of, the energy value chain.

The global Energy Agency, the IEA, said there is a record 3 billion barrels of crude and oil products distributed in storage tanks worldwide.

Even so, Kleinman doesn’t foresee a big drop in shale output.

The report goes on to caution that the strength of the U.S. dollar is particularly concerning as the current trends will continue over the next year and the bank believes “macro dynamics will remain a huge headwind” for dollar based commodity prices. “The fact that the funding needed for energy projects in the Middle East is estimated at 700 billion dollars over the next 10 years shows how important it is to provide adequate funding for such projects”, he said.

“There should be a continuation, if not an increase, in the pace of investments in the petroleum industry to guarantee the stability of the market on the short and long term”, he said. Opec ministers are due to meet December 4 to assess the market and decide on production levels. Even the Saudis have been downgraded by Standard & Poor’s and are facing a budget crunch. As the ruble stabilized, the bank dialed the interest rate back to 11 percent, where it stands today. It may now have misjudged its resilience.

As you know, the economies of all Arab countries, including nonoil-producing countries, are closely interconnected in various areas such as trade, investment, tourism, and the movement of labor, which means that these economies are correlated to oil and gas production and price levels. Frackers have been quick to cut costs with multiple pad-drilling, and they can revive production relatively quickly as soon as prices recover. This strategic showdown may end in an inconclusive draw.