Oil’s persistent march upwards continued into the Middle Eastern weekend, with Nymex crude futures closing on Friday at over $58, the highest level since November 2008.
Improved macro figures from the US, including better than expected employment numbers prompted analysts, and global trading desks to start ringing with talk of the fabled green shoots of economic recovery.
Whilst job numbers did not improve stateside, there were fewer cuts than had been forecast and housing figures across the US appeared to suggest that market had bottomed out in Q1 and was picking up again.
It’s certainly too early to say a recovery is in full swing, and Middle Eastern producers will be wary because oil fundamentals remain so weak in the North American and European markets, but the return to a fairly stable $55-plus territory is more than welcome throughout the Gulf.
To keep the most eagerly optimistic in check, the European demand outlook remains far from rosy. A growing ‘oil lake’ at Europe’s largest receiver port, Rotterdam, underlines this assumption, with almost all of its 75 million barrel storage capacity already full. The UK’s Times newspaper reports that 50 VLCCs, each carrying about two million barrels of crude, were being used for offshore storage in Europe, Asia, West Africa and the Gulf of Mexico. Citing Jens Martin Jensen, acting chief executive of Frontline, the world’s largest tanker company, the Times estimated that up to 20 of these VLCCs are believed to be in the Rotterdam-Amsterdam area.
Across the pond the outlook is marginally better. There may be a small increase in demand from the US as the summer driving season is soon to get underway, and refineries are likely to bring production back towards the 90% mark to meet domestic gasoline demand. Having taken advantage of the weaker price environment to perform maintenance and servicing programmes the big refiners will want to recoup their downtime costs as soon as the freeways fill up.
Few analysts will be pinning a figure on the price outlook in the short term, but the global trends are nothing if not encouraging. Oil prices have jumped around 10% in just two weeks, fantastic news for local upstream companies. With oil hovering just shy of the $60 a barrel mark, local drilling and production in the Middle East is back in the realms of being able to fund sustainable investment in both the E&P sector, and, crucially for local governments, the cash hungry non-oil projects such as tourism development and social infrastructure construction.
Send your thoughts, predictions and industry comment direct to ArabianOilandGas.com
Â
