Will 2017 be the year oil enters a balanced market?

February 22, 2017

 

It’s a well-known fact that oil prices aren’t quite what they used to be and as a result, margins have plummeted over the last 2 years. Is 2017 the year things start to balance out? Also, what role will Brexit play if any? What about the rapid rise of renewables?

 

Abhishek Deshpande is a Lead Oil Analyst at Natixis (part of the 2nd largest banking group in France) will be presenting at ComRisk on the key trends in soft commodity markets. Ahead of this, we got the chance to ask him about the above.

 

Whilst you’re here, you may as well book your place at Comrisk (it’s free!).

 

What is your overview of the current oil market?

 

Currently, the market since the last OPEC meeting were extremely oil saturated. Therefore the market was in urgent need of a remedy in the form of a potential cut from OPEC; which we have now received. Since the end of November, OPEC has announced a cut in production along with non OPEC cuts. We believe that in 2017, if this was to hold true, and cut as they have agreed to, we will enter a balanced market and for us this will help support prices finally after 2 years with price drop that we have seen. 

“Brexit still has limited impact on oil markets. We always said that it’s the impact of Brexit on the wider European economy that could potentially have an impact on the oil market, especially in the EU as a whole.” 

In your opinion, how is/ will Brexit affect the current oil & energy market?

 

Brexit still has limited impact on oil markets. We always said that it’s the impact of Brexit on the wider European economy that could potentially have an impact on the oil market, especially in the EU as a whole.  It may be that other countries might also ask for a similar referendum or in general we might see increased instability within the European Union especially after the Italian referendum results. All of that put together will have an impact on the oil market but not Brexit by itself. The UK alone is not really that significant to really impact the oil market as such in the near term.

 

How do you think the rise of renewables is affecting the energy market?

 

The rise of renewables is extremely important in the long term, not the medium term. However, given the fact that we have had significant involvement and investment in renewables and green technology in the past, it seems that technology has improved very quickly in the last decade or so. We believe that if this kind of development was to continue at a very high pace, then that long term could become very quickly the end of medium term. This is where the threat lies. I guess the big question is also how early the market prices it in.

 

Any chance you can give us a sneak peek of the topic you’ll address at COMRISK: "Key trends in soft commodity markets”?

 

I will be talking on energy commodities market around oil and gas in particular. Other than that, I’m most likely to give a talk about top level oil outlook itself but it also depends on what situation we will be in by May. I could also equally be talking on a specific topic which could involve the US shale.

 

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