OPEC sees tighter 2017 crude market

Updated 12 July 2016
0

OPEC sees tighter 2017 crude market

LONDON: OPEC has given an upbeat outlook for the oil market in 2017, saying global demand for its crude would be higher than its current production and pointing to a supply deficit rather than a sizeable surplus that has weighed on prices.
However, the Organization of the Petroleum Exporting Countries in a monthly report also cut its forecast for world economic growth this year, citing increased uncertainty following Britain’s vote to leave the European Union and said the pace of oil demand growth would slow slightly next year, in its first 2017 forecast.
“After the UK’s referendum to leave the EU, economic uncertainty has increased,” OPEC said in the report. “Potential negative effects have led to a downward revision of global economic growth in 2016 to 3.0 percent from 3.1 percent.”
Other forecasters including the International Monetary Fund have cut economic growth outlooks following the UK referendum. Concern about the economic impact of Brexit has weighed on oil prices, which at $47 a barrel have fallen from a 2016 high close to $53 in early June.
World oil demand will rise by 1.15 million barrels per day (bpd) in 2017, OPEC said, its first forecast for next year in the monthly report. That marks a slight slowdown from growth of 1.19 million bpd expected in 2016.
Oil prices have halved from two years ago in a drop that deepened after OPEC refused in late 2014 to cut output to support prices, hoping that cheaper oil would curb higher-cost rival supply such as US shale.
Despite a “dampening effect” of Brexit on the world economy next year, OPEC’s 2017 market outlook suggests the strategy is working as it expects oil supply outside the group to fall further, helping to boost demand for its own crude.
OPEC forecasts supply from outside producers will decline by 110,000 bpd in 2017 after an 880,000-bpd drop this year. The price drop since 2014 has hit non-OPEC supply as companies have delayed or canceled projects around the world.
Oil output from OPEC, adjusted to include returning member Gabon, rose 264,000 bpd to 32.86 million bpd in June, OPEC said. It expects demand for its crude in 2017 to average 32.98 million bpd, suggesting a supply deficit if OPEC keeps output steady.
Saudi Arabia told OPEC it raised output to 10.55 million bpd in June. The kingdom said it pumped 10.56 million bpd, a record, in June last year.
OPEC’s report points to a sizeable average surplus of 1 million bpd this year, but also to demand for its crude exceeding current production in the third quarter. The last full quarter when OPEC pumped less than demand for its crude was in 2013, according to past OPEC reports.
“The contraction seen this year in non-OPEC supply is expected to continue in 2017 but at a slower pace,” OPEC said. “Market conditions will help remove overall excess oil stocks in 2017.”


Infectious diseases are set to become as great a risk for global business as climate change

Updated 19 January 2019
0

Infectious diseases are set to become as great a risk for global business as climate change

LONDON: The Global Risks Report 2019 jointly compiled by the World Economic Forum (WEF) and the Harvard Global Heath Institute describes a world that is woefully ill-prepared to detect and respond to disease outbreaks.
In fact, the world is becoming more vulnerable to pandemics, despite advances in medicine and public health.
Global GDP will fall by an average of 0.7 percent or $570 billion because of pandemics — a threat that is “in the same order of magnitude” to the losses estimated to be caused by climate change in the coming decades.
“Outbreaks are a top global economic risk and — like the case for climate change — large companies can no longer afford to stay on the sidelines,” said Vanessa Candeias, who heads the committee on future health and health care at the WEF.
Potential catastrophic outbreaks of disease occur only every few decades but regional and local epidemics are becoming more common. There have been nearly 200 a year in recent times and outbreaks of diseases such as influenza, Ebola, zika, yellow fever, SARS, and MERS have become more frequent over the last 30 years.
At the same time antibiotics have become less effective against bacteria.
The impact of influenza pandemics is estimated at $60 billion, according to a report by the Commission on a Global Health Risk Framework for the Future — more than double previous estimates.
The trend is expected to get worse as populations increase and become more mobile due to travel, trade or displacement. Deforestation and climate change are also factors.
Businesses need to bone up on the risk of infectious diseases and how to manage them if the overall economy is to remain resilient.
Peter Sands, research fellow at the Harvard Global Health Institute and executive director of the Global Fund to Fight Aids, Tuberculosis and Malaria, said, “When business leaders are more aware of what’s at stake, maybe there will be a different dialogue about global health, from being a topic that rarely touches the radar screen of business leaders to being a subject worthy of attention, investment and advocacy.”
Predicting where and when the next outbreak will come is an evolving science but it is possible to identify certain factors that would leave companies vulnerable to financial losses, such as the nature of the business, geographical location of the workforce, the customer base and supply chain.
Disease is not the only threat. There is also fear uninformed panic. Past epidemics have shown that misinformation spreads as fast as the infection itself and can undermine and disrupt medical response.
The report advises planning for such emergencies by “trusted public-private partnerships” so that “businesses can help mitigate the potentially devastating human and economic impacts of epidemics while protecting the interests of their employees and commercial operations.”
It is estimated that the outbreak of Ebola in West Africa in 2014-2016 cost $53 billion in lost commercial income and the 2015 MERS outbreak in South Korea cost $8.5 billion. According to the World Bank, disease accounts for only 30 percent of economic losses. The rest is largely down to healthy people changing their behavior as they seek to avoid becoming infected themselves.
The authors of the report will make recommendations next week at the World Economic Forum annual meeting in Davos.