Living, as I do, in Dubai, it is very interesting, if not completely frustrating, to listen to the response of the United States, and in turn the Western Media, to the collapsed Doha talks to freeze oil output.
They’ve harped on about potential deals to curb output and production, and of course no deal was done, which means no change of direction for OPEC at all.
Give it up already; this is all about trying to force the OPEC members to back down and reduce production so the mostly zombie producers of the USA can have a chance of life.
Is it only me that has been listening to the same old rhetoric from the West for the last year or so, and seeing it have absolutely no effect at all on production or the stoic resolve of the OPEC cartel; the same cartel we heard just a couple of years ago was all washed up with little or no influence anymore.
Current measures are working, and the oil price is recovering now. Remember, of course, that the average price for the last 20 years has been around $40 a barrel. And that’s where it has levelled out at currently, despite the ‘bad news’ from the industry and the Doha talks most recently.
Quite frankly, in my view, that is the level that OPEC needs even if they set budgets around a higher price. Those budgets have been quickly and easily curtailed, and I believe the Arabian Gulf in particular is settled for the median price we are seeing.
Around $40 is the bottom for the oil price. It may bounce up and down a bit for a few months and, in my opinion, will start the slow crawl back to $50-60 for mid-year and then up towards $70 for year end, as I have been saying since last quarter of 2015.
As for the shale drillers being profitable in the $40-50 range, that is nonsense! It’s not broadly credible and simply isn’t true. Their motivation is purely to see massive debt get some relief, I have heard upwards of $250 billion potentially going up in smoke from the investment in US onshore shale drilling.
Production is dropping around the world and very specifically, of course, in the USA and it won’t come back in any great volume certainly below $60.
However, recovery is underway and rigs are being stacked and scrapped, which is long overdue. Contracts are cancelled to make way for new contracts, which are still profitable, just less so.
International and National Operators are taking advantage of the foolish over supply trend that the oil and gas, and specifically the drilling industry, has been driving for years. Drillers will recover, minus some casualties. This is a cycle and the upward trend is starting in the coming quarter.
In my own business we’re investing as are most of the producers in the Arabian Gulf where I’m based. It’s a trend others should follow across the industry. This should also include investment in innovation and technology, which is the key to creating a sustainable industry. Again, that’s happening at OES and I’m looking forward to collecting the Spotlight on New Technology Award we’re being presented at OTC in Houston next month.
Others should join us on this journey and listen to what we have to say. It isn’t quite the picture that’s being painted in the West.
By Richard Upshall, Executive Chairman, OES Oilfield Services