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How will oil at US$90 affect Oil & Gas industry?

by Emran Hussain on Dec 9, 2010

  14 Comments
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OPEC members are unmoved by a potential incremental oil price rise.
OPEC members are unmoved by a potential incremental oil price rise.

As crude hovers near the US$90 mark, OPEC members seem to be quite comfortable with allowing the price to finally hit this ‘magic’ number. According to analysts $90 per barrel will not trigger the pumping in of extra oil into the market as the oil cartel is reluctant to fiddle with its official output targets.

If the world’s major oil producers are unlikely to budge on production quotas, there is sure to be a knock-on affect on worldwide oil and gas development and the Middle East would be no different in this regard, although the hydrocarbon-rich region could certainly absorb the blow.

World oil demand is being led single-handedly by China’s massive economy with its voracious energy demand. This could see global demand grow by 2 million barrels per day (bpd) to over 86 million bpd bringing it back up to the pre-economic-downturn levels seen in 2007.

J.P. Morgan predicts that oil would top $100 in first half 2011 and reach $120 before the end of 2012 adding that OPEC would be ‘very slow’ to react to the higher prices.

Do you think oil will hit the magic number of $90 a barrel before the year is out, will it even surpass this?  What are the drivers for the price rise? What implications do you think it would have for the oil and gas industry, will projects slow down or not get awarded altogether? Let us know.


FEATURED COMMENT

It is a pity that the oil companies are raking in the billions of profit every quarter, but no talk now as in the past;

  14 Comments


Readers' Comments


rniet (Apr 18, 2011)
Oil prices
It is a pity that the oil companies are raking in the billions of profit every quarter, but no talk now as in the past; of building refineries or seriously looking at alternatives. As Ahmi Sami stated in his comments, the traders are controlling the market. There is ample oil in Saudi, the Stans, Indonesia, Africa, SAmerica, etc., in my opinion.

joe krummenacker (Apr 17, 2011)
new york
USA

$90 oil
$90 oil has gone the way of the fossils that produce it! Even before this price spike it was the largest displacement of wealth ever. an absolute foot to the throat of the US. oil co's have always pushed the envelope in exploration and will continue to do so, only more aggressively.

ahmed sami (Apr 14, 2011)
cairo
Algeria

the current oil and gas prices
Let us being approved about how the recent very high prices per oil barrel was not because the so called middle east crises. It definitely had an effect but also, in my point of view, it was the brokers and traders in either NYMEX or SIMEX who are keep telling the traders and other parts faulty information to raise their concern about how very bad the situation is in the supply and demand game.

Kent Gibson (Apr 12, 2011)
Lake Park
USA

$90
It will surely affect the industry, oil price hike will be the start of a domino effect...from fare hike to foods and supplies hike also

Omar Hussain (Feb 20, 2011)
Abu Dhabi
United Arab Emirates

Should be $200 realistically
Just a few thoughts, first one is what is the big deal. Over the last 30 years price of oil has fluctuated alot, going as low as $10 a barrel a while ago. Now I want to bring in some basic economics to this topic. First of all the value of the dollar has severely weakened over the last quarter century. So it sounds like alot compared to maybe 10 years ago, but it really isnt. Look at the prices of other commodities such as steel, wheat, etc. They have all risen by an average of 50% in the last year alone but you don't see the world getting all stirred up over that. General rule of inflation on a global scale dictates that prices should rise by an average of 5% anyway. If you started that rule from 30 years ago the price of oil should realistically be around $200 dollars a barrel by now. Even with the so called economic downturn, demand for oil is still on the increase globally. Plus factor in that most of the production claims by the Middle East are on the optimistic side and the price of oil will easily go up this year. To answer the original question, it means most IOC's will continue to fund for ultradeep water reserves and NOC's will continue in purchasing more oversea's reserves. China will continue its infrastructure development of African nations, which surely is a good thing as long as the price of oil remains high.

Leslie McCune (Feb 9, 2011)
London
United Kingdom

Oil at $90 bbl
Oil at $90/bbl seems about right. It continues the incentive to reduce dependence on oil-based energy (which will conserve reserves) but provide a strong revenue stream to support the development of oil producing nations. It will also force efficiencies and consolidation in the downstream petrochemicals sector. But at $90/bbl for crude the wholescale, environmetally-damaging exploitation of low cost coal reserves for synthetic fuels and chemicals will still be marginal in terms of economic viablility.

Qidwat Uddin Kidwai (Jan 31, 2011)
Abu Dhbai
United Arab Emirates

$ 100 oil by March 2011
Indeed the people associated with the oil business either oil producers or service providers will be happy by increase in oil price, but those are handful of people ONLY. The major impact on a global level is on the common person as the basic commodity cost will increase correspondingly, which has been seen in the past. Once the price goes up it never returns back to same. It takes years to stabilise the economy which is enough to create more urge to earn money in turn leads to corruptions. We the oil producers must think for common man getting affected by increase in oil price. Qidwat Uddin Kidwai, Mechanical Engineer, Bunduq Company Limited, Abu Dhabi UAE.

Bassey (Jan 30, 2011)
Coventry
United Kingdom

Price of Oil at $90
I am optimistic that the prices of oil will continue to soar. With increasing development in China and India, this will put a strain on the demand for oil thereby causing the price to naturally go up. Of course OPEC will respond, but it will be in such a way so as to maintain the price.

Paul\'s Anangryman (Jan 26, 2011)
Doha
Qatar

Easy tiger..
Wow, Paul is pretty fired up! "The gloves will be removed eh?!" Given the massive shale gas find in the States it is feasible that the US can become more energy independent, but buying oil from Saudi Arabia (not that it buys that much) is probably cheaper than drilling and developing deepwater finds in the Gulf of Mexico. Your precious billions are probably being saved by bright people and oil firms buying cheaper oil from abroad!

Paul Winston (Jan 25, 2011)
Boston
USA

Americans are fed up!
Americans are fed up with paying billions to other nations for their energy needs. With the new congress and a new president in 2012 the gloves will be removed and oil and gas exploration and drilling will go "full speed ahead" inside the borders of the USA, leaving OPEC to sell to the rest of the world. Don't wake a sleeping giant. It might prove to be a fatal mistake.

Sushil Prasad (Jan 24, 2011)
Gurgaon
India

How will oil at US$90 affect Oil & Gas industry?
Ideally the prices should remain range bound between US$80-90. Economic recoveries are still very tentative in the Western world and high oil prices would take the wind out of the sail once again. Prices in the range of USD 80-90 should keep both the oil producers and the consumers evenly poised and create a Win-Win situation.

Mohammad (Jan 17, 2011)
Abu Dhabi
United Arab Emirates

$100 dollar oil by March
We have seen Europe and American economies make significant gains with oil at $80 - $90 so $100 would help inject some funds into the regional economies which is much needed. The Middle East has a duty to push on with its own infrastructure projects as well as gearing up production levels of oil and gas, both of which are capital intensive.

Bahjat Tabbara (Dec 22, 2010)
Amman
Jordan

Competition is around the corner
Higher crude prices will mean more balancing & competition will enter. Wind, solar, & nuclear will replace fossil fuels for electric generation followed by (we hope) oil shale, tar sands & even coal to produce synthetic blends. At prolonged high oil price rates we will see the emergence of new fossil fuels; Economies of Scale, new technologies will mean that crude producers will end up with a major issue in the 21st century. Keep in mind there's possibly 3-times as much oil shale.

Doug Spittles (Dec 12, 2010)
Al Khobar
Saudi Arabia

$90 Oil
Oil in the $90 range is very healthy for both consumers and producers. What we need to worry about is the $100+ scenario. It could completely destroy the economic recovery underway in the US and parts of Europe.


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