Published On: Fri, Mar 31st, 2017

Recovery Prospects Expected For The Oil Industry In 2017

In November, 2016, OPEC members and Russia decided to cut a total of 1.758 million b/d, marking the largest production cut meant to speed up global oil market rebalancing. Brent crude oil prices then sharply rose. At the same time, during the beginning of 2017 we saw a clear swing towards deficit from surplus. This marks a change in the oil industry, one that moves towards a recovery following numerous problems in the past.

An immediate change that appeared was seen in the fact that the oil industry started to become more stable. A clear indication of that is the increase in benefits offered for people working in the industry.

Photo/Tech collector via wikimedia commons

According to Dave Taylor, owner of the newly redesigned Drillers.com, the site is now “focusing on attracting real jobs to the site and, while we are also working to make the candidate experience as easy as possible, the best experience will be when we help people get the job that they deserve”. This is just one of the examples highlighting that the oil industry now offers better drilling jobs and a more positive career outlook for those interested.

Production costs are rapidly shrinking, leading to clear benefits from US shale oil producers. OPECs are losing share in favor of US drillers and this will not continue for long. This marks the presence of a market in which potential new investments are not likely to happen in the near future. The main focus is put on recovery and making the entire oil industry more stable, which is exactly what happened.

The production cost cut has been agreed for a period of six months. During this time the crude oil prices are recovering and will wane in 2017. The global oil demand now reverts to true structural verities. We have markets that are emerging in Asia-Pacific, which is exactly where the new investments are most likely going to appear. Expansions will be noticed in urbanization, rising incomes and manufacturing expansions.

2017 will be a year of accelerated global economic growth. Most of the oil industry improvements will appear because of improvements that are made in both emerging economies and in the US. Resource exporting companies have been suffering for years now but 2017 is when things will change. The forecast offered by the International Monetary Fund shows a growth of 0.2% to 0.4% this year. OECD also forecasts a 2017 growth rate of 1.8%, which is 0.2% more than 2016.

The only potential negative is that downside risks are now more pronounced. We have lower interest rates that spurred a rising asset price, rising vulnerability due to global financing tightening and rising worldwide debts. The trade growth noticed at a worldwide level is low. Because of this, it is possible that oil industry growth will not be as high as anticipated. Even so, the current rates in modernization and even salaries are stable, with small growths being present. Long-run structural reformation is very hard to carry out as there are various geopolitical and policy uncertainties present. Even so, the recovery prospects are positive.

Author: Lolita Di


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