Oil Price: A Complicated Conundrum
When will oil prices reach 100 dollars mark? This is a million dollar question which every oil and gas personnel wants to know. It has been years since international oil markets witnessed oil prices in three digits. This industry is known to be volatile when it comes to oil prices. Previously this volatility lasted for few weeks or months, then oil prices bounced back to ~USD 100 mark. This time wait is lengthy and casting down.
This long oil price depression is mainly due to glut in oil production; dip in oil demand and US advancement in Shale oil/gas technology. In the recent past, few efforts have been made to arrest oil price decline, Organization of the Petroleum Exporting Countries (OPEC) comprising of the biggest oil exporters came up with a proposition to limit oil output. However, this step has not shown its affect yet and I am personally doubtful, if it ever will?
Oil price history from infomine.com
Low oil prices jolted the oil and gas industry very bad, thousands of people lost their jobs, R&D projects have been truncated, salary increments and perks of the employees are curtailed etc. However interestingly, at the other end of spectrum, mergers and accusations are taking place, companies are going for new exploration ventures since rig and other services costs are at their minimum. Oil based economies like GCC countries, Russia and Venezuela are facing huge deficits in their foreign reserves, while small economies like Pakistan, Bangladesh etc. are benefiting by this since they spent millions of dollars every year to import oil.
Looking at the current scenario, it seems highly unlikely that oil prices will go beyond $60 in 2017 as US shales are blooming at its peak, several oil and gas pipeline projects are in progress & major producers are fighting for market share more than worrying about declining profit. Risk of abrupt dipping prices is even very much possible as we have observed prices fluctuating between 45 to 55 USD in a last quarter. It is a high time for oil and gas industry to adopt this low oil price syndrome and take such steps which would not only secure their existence but make path to grow again.
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