Now Reading
Long-term oil demand outstrips supply – UAE energy minister

Long-term oil demand outstrips supply – UAE energy minister

Oil companies should invest in the market when prices remain low, says Suhail Al Mazrouei

Long-term demand for oil exceeds supply despite the current market scenario, according to the UAE’s energy minister Suhail Mohamed Al Mazrouei.

Speaking at a conference in Abu Dhabi, he urged oil companies with strong balance sheets and a long-term view to invest in – rather than withdraw from –  the market.

Companies that invest during the existing downturn in prices stand to profit the most when supply and demand comes back into balance, he stressed.

“The oil industry is inherently cyclical – this is a basic point that often gets overlooked in the short-term noise – and finding an equilibrium between supply and demand is almost impossible,” he said.

“However, demand has consistently increased, and the business cycle that drives an increase in demand moves much more quickly than the oil industry can expand its capacity for supply.”

Oil prices have fallen sharply in the last two years, due to a variety of factors including increased supply, falling demand and geopolitical tensions.

Energy exporting countries in the Gulf have been hit hard and several oil companies have announced consolidation and put projects on hold.

Al Mazrouei said around $200bn worth of oil and gas projects had been postponed worldwide because of the fall in prices.

“The dramatic reaction in reducing investment will inevitably lead to demand coming back into equilibrium, and ultimately exceeding supply in the coming years,” Al Mazrouei said.

Lower oil costs also acted as an economic stimulus for countries that were net energy importers, supporting growth in the global economy, in turn increasing demand in the commodities markets, he added.

With the industry needing between six and nine years to move from discovery of new deposits through to production, the dramatic fall in investment would leave companies making those cuts slow to respond when the market started to rise.

“We can see the cyclical nature of the industry reinforced before our very eyes. For those companies that are strong enough to hold their nerve and make strategic long-term investments, this is a golden opportunity,” he said.

© 2020 MOTIVATE MEDIA GROUP. ALL RIGHTS RESERVED.

Scroll To Top