Outlook for oil does not look good

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No sign of recovery in the near future

Kamel Al-Harami Independent Oil Analyst

WITHIN the coming three years, the oil price might reach $50 a barrel. However, it will require some hard work, and some laying-off of workers which could reach 30,000 globally.

This time, oil must fight non-fossil energy. Therefore, the coming years do not seem so bright, and we are in need of global restructuring including some amalgamations between oil companies. The demand for oil will remain weak and below its historical rate of 100 million barrels per day based on last year’s figures.

Therefore, the next five months do not look bright for oil companies’ financial and operational outputs. Billions of dollars have to be written off from their balance sheets without exception. Also, investments in upstream must be minimized coupled with the shutting down of more than ten refineries globally in the USA, Europe, and Asia.

There are still refineries with the capacity of three-million barrels that have to shut down, especially with the new refineries from Kuwait and Nigeria. New ones are being planned, and whether they will go onstream is not clear in the Gulf countries in Iraq, and Iran to meet the ongoing growth on demand now and in the future.

As if this is not enough, Europe by 2030 will ban the manufacturing of cars that run on petrol and diesel, as they will opt for electric cars. This will put more pressure on the gasoline demand.

Here, the refineries must change the mode of their operations and switch to other products or opt for petrochemical. Of course, some crude oil production capacity will go out like US shale oil with about 1.2 million barrels upstream in search for new oils per day, plus another 3-4 million due to loss of investments.

At the same time, OPEC is still with unutilized capacity of crude oils in Saudi Arabia, Iraq, and Iran, which are ready to move any day, as well as Venezuela.

This is under the assumption of full recovery after COVID-19 crisis and the return of our lives the way it was in January this year. Oil has a long way to go in terms of recovery but let us not be too optimistic that oil will extend beyond $ 60 a barrel. Certainly, OPEC countries will be facing severe times in the near future.

By Kamel Al-Harami Independent Oil Analyst

Email: [email protected]

This news has been read 26675 times!

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