Efforts aimed at bringing crude exporters within and outside of the Organisation of Petroleum Exporting Countries (Opec) together will go a long way in balancing the oil market, which is essential for global economic stability.
Oil prices have dropped sharply since mid-2014, forcing producers and companies alike to shelve projects and cut oil investments, raising worries over a future supply shock that could lead to a spike in prices.
Five members of the Opec and two non-Opec countries held “constructive” informal consultations on the sidelines of the 23rd World Energy Congress (WEC) in Istanbul recently, according to the Vienna-based organisation.
Opec Conference President and HE the Minister of Energy and Industry Dr Mohamed bin Saleh al-Sada had said in the statement on Opec’s 170th (extraordinary) meeting in the Algerian capital on September 28 that an oil production target for the organisation’s 14 member countries would range between 32.5 and 33mn barrels per day (mbpd).
Obviously, this will accelerate the drawdown of the existing substantial overhang in global oil stocks and bring the rebalancing of the oil market forward.
According to the Opec statement, the recent meeting in Istanbul was a follow-up to that landmark agreement. Opec’s Algiers agreement is due to be discussed further at the 171st meeting of Opec in Vienna scheduled for November 30.
Opec officials seem to be embarking on a flurry of meetings to nail down details of an agreement reached in Algiers last month on modest oil output cuts, the first such deal since 2008.
“The chain of meetings, starting in Istanbul, signal that unlike in the first half of 2016, the group is more serious now about managing the global supply glut and propping up prices,” a Reuters’ dispatch showed.
Oil prices have trended higher since September 27, with Brent gaining about 13% and hitting one year highs above $53, after the Organisation of the Petroleum Exporting Countries announced its first planned output cut in almost eight years.
The region’s largest financial institution, Qatar’s QNB expects rebalancing in the oil market to continue, driven mostly by demand growth, notwithstanding moderately higher supply from the world’s major producers.
Therefore, QNB expects oil prices to average $55 a barrel in 2017 and to continue converging towards $60 over the medium term. Also, QNB maintains its forecast that oil prices will average $45 this year, before rising to $55 in 2017 and $58 in 2018.
Increased spending in the oil and gas sector is likely in the coming years in view of a better price outlook, BMI Research points out. 
The Fitch Group company sees a 2.5%-7.5% increase in capital expenditure (capex) in the global energy industry this year and in 2017 depending on the speed of price recovery and rates of asset divestment. It forecasts a further rise of at least 7% in 2018.
As such, 2017 looks to be a good year in which to take advantage of maximum cost deflation and negotiate the most competitive service costs for new developments. Therefore, more major projects are expected to be sanctioned in 2017.