North Sea firms welcome oil price rise

Deirdre Michie

The North Sea oil and gas industry gave a cautious welcome to news that some of the world’s biggest producers agreed a deal to curb production for the first time since 2008, sending oil prices up 10% to over $50 a barrel.

The Organization of the Petroleum Exporting Countries (OPEC), which makes up about a third of global oil supply, agreed to cut production from January by around 1.2 million barrels per day or more than 3% to 32.5 million barrels per day.

“This should be a wake-up call for skeptics who have argued the death of OPEC,” Amrita Sen, chief oil analyst at Energy Aspects Ltd, told Bloomberg News.

“The group wants to push inventories down.”

Russia, not a members of OPEC, agreed to cut output by 300,000 bpd.

Oil & Gas UK chief executive Deirdre Michie told reporters: “While there is no guarantee that today’s decision by OPEC to reduce oil supplies will translate into a sustained price increase, there are positive signs from the market, with Brent up 8.6% at around $51.”

Michie added: “While industry has demonstrated resilience and determination to adapt to a lower for longer oil price environment, an increase in prices would certainly be welcome news in these challenging times …

“There was a similar rally in September when OPEC last moved towards reaching an agreement on cutting supply, so everything depends on the durability of the supply cuts.”

Bob Minter of Aberdeen Asset Management told Energy Voice the OPEC cut was bigger than most people had expected and could send oil prices to between $56 and $60 a barrel.

“People were seriously starting to question OPEC’s ability to react to what has been going on in the oil market and this reaffirms their ability to act as a group,” said Minter.

“Greatly increased demand for oil is not necessarily a given in the years to come.

“Trump might try to tear up the Paris Accord, but it’s the likes of India and China that matter the most and they don’t want to rely on oil.

“OPEC is going to need to harness all of its powers of coordination and bargaining to chart this existential threat.”