Oil expected to stay below US$50 in 2016: APICORP

Manama : Oil price is not expected to go above US$50 for a barrel in 2016, according to a recent report published by the Arab Petroleum Investments Corporation (APICORP).

“While oil prices are expected to recover towards the end of the year, they will remain relatively weak given the high level of stocks and the flow of weak macroeconomic data, which will combine to put a cap on the price. In the absence of an agreement on a collective cut or a geopolitical disruption, oil prices are not expected to exceed $50/b for the rest of 2016,” the report said.

APICORP says that the biggest source of uncertainty on the supply side in 2016 remains OPEC and particularly Iran, which is eager to recover its market share after the lifting of sanctions.

“The probability that Iran will reach its pre-disruption level by the end of this year remains low, but it will still manage to increase production from shut-in fields, adding further pressure to an oversupplied and fiercely contested market.”

Global demand for oil is expected to grow strongly by more than one million barrels per day, however, even that is not enough to propel the oil price above US$50, notes the report.

The report also predicts that for the foreseeable future, “LNG prices are expected to remain under pressure from the entry of new supplies and weak demand.”

Despite the bleakness in energy prices, APICORP estimates a 19 per cent increase in total MENA energy investment activity over the next five years, representing an increase of US$145 billion from the year before, to US$900 bn.

APICORP states that US$289bn of investment has already been committed to projects under execution in the region, while an additional US$611bn worth of development is planned.

Leading the investment drive will be Saudi Arabia, along with the UAE and Kuwait, which will look to invest across the energy value chain. Iraq and Iran will play catch-up and are determined to push their ambitious oil and gas plans forward, but will face many above-ground challenges.  

“Global investments in oil and gas fell by 20pc in 2015 compared with 2014, one of the biggest drops in history. However, against this trend, we expect the MENA region to continue investing heavily as major energy-exporting countries expand the size of their energy sectors and strengthen their positions within global markets” says Dr. Raed Al-Rayes, Deputy Chief Executive & General Manager of APICORP.