OPEC sees tighter 2017 crude market

Updated 12 July 2016

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.”


Gulf Marine CEO quits after review sparks profit warning

Updated 24 min 14 sec ago

Gulf Marine CEO quits after review sparks profit warning

  • Tensions in the Arabian Gulf, a worrisome global growth outlook and uncertainty over oil prices have recently dampened investor confidence

DUBAI: Gulf Marine Services said on Wednesday Chief Executive Officer Duncan Anderson has resigned as the oilfield industry contractor warned a reassessment of its ships and contracts showed profit would fall this year, kicking its shares 12 percent down.

The Abu Dhabi-based offshore services specialist said a review by new finance chief Stephen Kersley of its large E-class vessels operating in Northwest Europe and the Middle East pointed to 2019 core earnings of between $45 million and $48 million, below $58 million that it reported last year.

A source familiar with the matter told Reuters that Anderson, who has served as CEO for 12 years, was asked to step down. Anderson could not be reached for comment.

The company, which in the past predominantly operated in the UAE, expanded operations and deployed large vessels in the North Sea and Saudi Arabia nine years ago and listed its shares in London in 2014.

Tensions in the Arabian Gulf, a worrisome global growth outlook and uncertainty over oil prices have recently dampened investor confidence.

The North Sea has seen a revival in production in recent years due to new fields coming on line and improved performance by operators following the 2014 oil price collapse.

Still, the basin’s production is expected to decline over the next decade, according to Britain’s Oil and Gas Authority.

“(The CFO’s) review has coincided with a pause in renewables-related self-propelled self-elevating support vessels activity in the North Sea, which will impact several of the higher day-rate E-Class vessels,” Investec wrote in a note.

Gulf Marine appointed industry veteran Kersley as chief financial officer in late May as it sought to halt a slide which has seen the company’s shares fall nearly 80 percent last year and another 23 percent so far this year.

The company said market conditions remained challenging and that it was still in talks with its financial advisors regarding a new capital structure.

“Management, the new board and the group’s advisors, have been in negotiation with the group’s banks on resetting its capital structure and progress has been made,” it said in a statement.

Last year, Gulf Marine said contracts were delayed into 2019 as the company was seen to be in breach of certain banking covenants at the end of 2018.

The company said it was still in talks with its banks and individual lenders with hopes of getting a waiver or an agreement to amend the concerned covenants.