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Whilst the Vision stresses diversifying the Saudi economy away from oil, this does not mean oil production or oil-related industries are going to be neglected in any way. Accordingly, a number of key steps are planned to be taken to ensure that crude oil refining remains an essential, albeit less prominent, pillar of the Saudi economy. Prices are likely to remain elevated in the near term due to continued regional geopolitical tensions.
The recently observed uptick in oil prices has given many US shale oil producers the opportunity to expand production. Besides higher borrowing costs, shale oil producers also face the possibility of constrained capacity leading to inflated operating costs. One area where costs are likely to rise is related to oilfield services, which includes the cost of rigs, equipment and personnel.
Oil prices declined by 8 percent quarter-on-quarter in Q2 , the first such decline since Q1 Higher OPEC oil production, mainly from Nigeria and Libya, plus continued rises in US oil production, were the primary triggers for the slump in prices. In addition, as the recovery in US oil production continues, with US shale oil supply expected to achieve an all-time record high in the next few months, the risk to oil prices remains firmly skewed to the downside.
Oil prices rose 10 percent quarter-on-quarter in Q1 , but volatility levels were up too, especially towards the end of the quarter. Although both OPEC and non-OPEC cuts are contributing to a reduction in global oil balances, global commercial oil inventories nevertheless remain high. Demand is expected to pick up in H2 As a result, the sector has been identified by both the National Transformation Program NTP and Vision to help lead the push away from fossil fuel reliance.
But this restructuring of the sector comes at a time when it is already facing up to a number of challenges, both at home and abroad. Besides seeing a drop in global chemical prices in the last two years, the sector has also seen domestic feedstock prices being raised in , with further rises expected in In addition, global competition is set to intensify, especially from the US and China, where significant rises in petrochemical capacity are expected in the next few years.
Despite the relatively stable start to the year, oil price volatility is likely to re-emerge during as global oil markets face up to a rising risk of OPEC noncompliance to production cuts, upward revisions in US oil production, and policy initiatives from the new US administration. OPEC agreed to cut its own production by 1. Oil prices immediately rose by 8 percent following the announcement and could rise even further in the short term.
Whether prices remain elevated will depend on OPEC implementing its agreement with discipline as well as no major rises in US shale oil supply. Overall, whilst the OPEC cuts represent an up-side risk to oil prices, due to the hurdles mentioned above, we are not revising our current forecasts just yet, but will be monitoring developments closely.
Prices were further supported by statements from Russia expressing its readiness to cooperate in order to limit oil output. Whilst the deal to cut remains fragile and fraught with numerous obstacles, as a result of the financial difficulty faced by a number of OPEC member economies, most notably Venezuela, Nigeria and Libya, there will be immense pressure to ensure some sort of deal is reached in November.
News Awards Careers Contact Us. Oil market In-depth reports on key Oil market. Search by Year Tue, 20 March Outlook on Crude Oil Refining in Saudi Arabia Whilst the Vision stresses diversifying the Saudi economy away from oil, this does not mean oil production or oil-related industries are going to be neglected in any way.
Sun, 10 September Shale Oil 2. Tue, 25 July Quarterly oil market update- Q2 Volatility Returns to Oil Markets Oil prices rose 10 percent quarter-on-quarter in Q1 , but volatility levels were up too, especially towards the end of the quarter. Sun, 04 December Oil Note: For more information, please contact: