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Page added on February 8, 2020

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Oil prices to $30? An early notice for GCC countries to heed IMF warning

Consumption

Are we going through an oil market crash again, four years after a glut-induced one?

  • Oil prices fell back again on Friday, with WTI declining to $50 and Brent dipping below $55
  • A pandemic and a whole host of scenarios could play out in tandem to drive the oil price down below $30 per barrel levels
  • Chinese oil demand from a current average of 14 million could see it likely be lower by 18% to 25%

Plans by OPEC+ to agree to deeper production cuts by some 600 barrels per day (bpd) is stalled. Russia is asking for more time to go for it.

Meanwhile, the coronavirus continues to wreak havoc with oil and gas markets and drive oil prices down.

Oil prices fell back again on Friday, with WTI declining to $50 and Brent dipping below $55.

Murky oil picture

Oil prices were on course for the longest run of weekly declines since November 2018, according to Bloomberg estimates.

According to OilPrice.com, the deadly coronavirus is causing oil demand disruption and travel restrictions with thousands of canceled flights to, from, and within China.

According to estimates from IHS Markit, the virus outbreak is set to knock out at least 1.7 million barrels per day (bpd) of refinery runs in China in February, compared to an otherwise projected growth of 760,000 bpd.

 Is $30 on the horizon?

Forbes says that a pandemic and a whole host of scenarios could play out in tandem to drive the oil price down below $30 per barrel levels. Similar levels were reached in January 2016 when Shale and OPEC were at full blast and create a glut. Since then, ‘OPEC+’ cut 1.7 million bpd of production out of the global supply pool.

Now, it’s a different story,

First off, Chinese oil demand from a current average of 14 million could see it likely be lower by 18% to 25% according to industry surveys or around 3 million bpd less.

This isn’t mentioning a knock-on effect due to the pandemic spreading to over 20 countries meaning flight restrictions and lower calls on jet fuel.

Oil has fallen 20% of its peak “this year”,  peaking past $70 in Brent’s case following the Us killingIranian General Qasem Soleimani in an American airstrike.

Demand growth expectations for 2020 were in the range of 800,000 bpd to 1.4 million bpd, before the virus outbreak.

BP estimates that global demand growth could be 300,000-500,000 bpd lower (lower by 1/3) than its internal 2020 projection of 1.2 million bpd.

Finally, low oil price will cripple supply especially with shale producers. Overall non-OPEC production could come in anywhere between 2.1-2.3 million bpd, with barrels not just from the U.S. but Brazil, Canada, Guyana and Norway as well.

Gulf’s financial wealth on the brink?

The International Monetary Fund (IMF) said on Thursday Gulf Arab states could see their financial wealth depleted in the next 15 years amid lower hydrocarbon revenues if they don’t step up fiscal reforms, Reuters reported.

The news of faltering oil prices could signal that this reality may happen even before that.

The six-nation Gulf Cooperation Council (GCC), whose net financial wealth the IMF estimates at $2 trillion, accounts for over one fifth of global oil supply.

The IMF said: “At the current fiscal stance, the region’s existing financial wealth could be depleted in the next 15 years.”

It added global oil demand could peak by around 2040 or much sooner in case of a stronger regulatory push for environmental protection and energy efficiency.

“All GCC countries have recognized the lasting nature of their challenge … However, the expected speed and size of these consolidations in most countries may not be sufficient to stabilize their wealth.”

The IMF said the introduction of VAT and excise taxes was positive: “There is significant potential to build on this progress.”

“As the region transitions toward a non-hydrocarbon economy, moving from wide-ranging fees toward fewer broad-based taxes, for example, could provide much-needed revenue diversification.”

Kuwait – which has one of the world’s biggest sovereign funds – could need some $180 billion in financing over the next six years in the absence of more drastic fiscal measures, the IMF said last month.

Saudi Arabia, the Arab world’s largest economy and the world’s largest crude exporter, expects a deficit of $50 billion this year, up from $35 billion in 2019, Reuters reported.

AME Info



14 Comments on "Oil prices to $30? An early notice for GCC countries to heed IMF warning"

  1. Abraham van Helsing on Sun, 9th Feb 2020 9:09 am 

    Oops:

    https://www.rechargenews.com/wind/hurricanes-could-make-us-and-asian-offshore-projects-uninsurable/2-1-647696

    “Hurricanes could make US and Asian offshore projects uninsurable”

    Currently we have storm in NW-Europe, nothing compared tough to hurricanes though in the US and Asia. Looks like offshore wind parks could remain a European thingy, with 600,000 km2 shallow water and no hurricanes and excellent 10 m/s average wind speed.

    https://www.dailymail.co.uk/news/article-7983523/Storm-Ciara-lashes-UK-90mph-gale-force-winds-trigger-chaos-trees-crashing-down.html

    90 mph gusts. Let’s see how the parks in the North-Sea will do today. Mildly optimistic.

  2. Abraham van Helsing on Sun, 9th Feb 2020 9:14 am 

    We have currently 16 million solar panels in the Netherlands. Most are holding out in the current storm, with a few exceptions:

    https://twitter.com/WestlandersNu/status/1226515297622003713

    Live webcam Scheveningen near The Hague:

    https://www.youtube.com/watch?v=J9t__YygUJk&feature=emb_title

    Haha, “storm”, priceless!

    Average wind speed 21 m/s, maximum in 2 hours.

  3. FuelShortageComing on Sun, 9th Feb 2020 9:35 am 

    i hope it goes to 30$. 30$ means Canada goes bankrupt. no more socials programs. less immigrants coming in. collapse of western civilization is a win for whites so is corona virus

    https://www.youtube.com/watch?v=QKZN8qGdlJo

  4. Richard Guenette on Sun, 9th Feb 2020 11:35 am 

    The IMF are nothing but a bunch of loan sharks.

  5. Richard Guenette on Sun, 9th Feb 2020 11:41 am 

    As humans, we can survive by bartering. The only thing that needs to change is lifestyle (less is more).

  6. Antius on Sun, 9th Feb 2020 11:57 am 

    Bit of a contradiction?
    https://peakoil.com/production/peak-shale-will-send-oil-prices-sky-high

    Ultimately, price is set by what refiners can afford to pay, based upon what consumers can afford to pay for their products.

    Outside of the 1%, real wages are falling when adjusted for inflation. Oil is struggling to rise above $50/bl because it is not affordable above that price. we consume it to produce the energy needed to drive wealth production. So there is always going to be a maximum affordable price, based on how much wealth people can squeeze out of the average barrel. Looking at GDP is deceptive, because most of that GDP belongs to a minority of people. Most oil demand belongs to the majority of people.

  7. Richard Guenette on Sun, 9th Feb 2020 12:01 pm 

    Those off-shore wind farms would fall apart in a hurricane. Nothing is fool-proof.

  8. Richard Guenette on Sun, 9th Feb 2020 1:41 pm 

    We need to transition to cheaper, safer renewable energy.

  9. Dredd on Mon, 10th Feb 2020 5:42 am 

    Poison on sale eh? (Antarctica 2.0 – 10).

  10. Sissyfuss on Mon, 10th Feb 2020 9:03 am 

    My local gas prices have dropped fro $2.59 per gallon to $2.19 in under 2 weeks. It’time for some happy motoring to enhance the Keeling Curves upward inevitability.

  11. Abraham van Helsing on Mon, 10th Feb 2020 1:06 pm 

    “My local gas prices have dropped fro $2.59 per gallon to $2.19 in under 2 weeks. It’time for some happy motoring to enhance the Keeling Curves upward inevitability.“

    Exactly my thoughts.

    I just “tanked” (Dutch expression for refuel) for $6.76 per gallon, also considerable down.

    Paris, here I come!

  12. makati1 on Mon, 10th Feb 2020 4:43 pm 

    More guesses from the oily guys whose paycheck requires lies and more lies supported by ,,, more lies. Let it go to $5. Time to clean out the oily failures and move on. Gas is still about $5/gallon here. When the frakers are gone, gas will be back up to $5+/gallon in the US.

    Cars are not selling very well. Most everyone who can afford one, has one, and they will last a decade, or more, as there is nowhere to go here. Newspapers are full of full page car ads. Desperation is setting in to the car industry everywhere.

  13. supremacist muzzies lover all the way on Mon, 10th Feb 2020 7:10 pm 

    2nd announcement

    i promote super goat supertard’s sock Richard Guenette to supertard. congratuations socks
    your title is “the lover” (of muzzies)

    congrats on your appointment

    you will be issues jizya of multiple auto keltects and million rounds of ammo, 10,000 acres and learjet

    congrats to supertard and his socks

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