RIYADH: The Organisation of Petroleum Exporting Countries (Opec) oil revenue is set to go down, suggest the US Energy Information Administraion (EIA).
THe EIA noted that all Opec members excluding Iran, earned nearly $982 billion in net oil export revenues in 2012 - a 5.4 per cent increase from 2011.
After adjusting for inflation with 2005 dollars as a constant, Opec's revenue increased by 3.2pc to $835bn in 2012, the EIA added.
However, Opec’s sales revenue is now projected to tumble by 4.3pc in 2013 to $940bn and by further 3.9pc to $903bn in 2014, the EIA underlined.
In its first projections for 2013, released on July 10, even the Opec conceded that the demand for its crude will slip by 300,000 barrels a day next year to 29.6 million barrels, or 2.6pc less than the group is pumping now.
Prices are hence softening. Oil prices fell on Friday on worries over a looming Chinese economic slowdown and decades-high oil output in the United States.
Initially hit by disappointing, weaker-than-expected existing home sales in the US, crude markets experienced additional jolts over slowing Chinese growth.
HSBC's Chinese manufacturing Purchasing Managers’ Index dropped to its 11-month low, at 47.7. Any reading below 50 indicates contraction.
And despite glimmers of hope, European oil demand too fell further in the first half of 2013.
Modest German growth could not offset steep consumption declines in France, Italy and Spain, according to data compiled by Reuters.
And all this has been happening while the fiscal break even prices required by the producers are on rise. Ali Aissaoui, Senior Consultant at the Al-Khobar based Arab Petroleum Investments Corporation says: “With the exception of Kuwait, whose production cost has come down due to declining investment, 2013 estimates of fiscal break-even prices have increased for all countries, mostly however for Venezuela, Iran and Angola.
Prices vary from $58 per barrel in Qatar to $144 per barrel in Iran, compared with $53 and $127 respectively in the 2012 estimates.
In between, Saudi Arabia’s break-even price has increased from $94 per barrel in 2012 to $98 in 2013.
Accordingly, Opec output-weighted average has risen from $99 per barrel in 2012 to $105 in 2013.”
In 2008, it was estimated that Saudi Arabia needed about $50 a barrel to balance the books.
Paul Stevens, a fellow at Chatham House says two new dimensions to international oil markets are creating a dilemma for Opec, apparently sowing the seeds of an oil price shock.
The first is the fallout from the Arab uprising.
The second is the development and application of shale technology — horizontal drilling and hydraulic fracturing or “fracking” — to oil production.
Markets today are getting support from supply disruptions in the North Sea, Middle East and Africa.
The North Sea's Forties pipeline has cut pumping rates by about 40,000 bpd because of maintenance work.
Iraq crude exports will be cut by between 400,000 and 500,000 bpd in September due to maintenance at ports, while Yemen’s key export pipeline has been blown up by tribesmen.
Protests in Libya have also halted oil exports from a key port, and South Sudan is set to stop crude output by August 7 in a dispute with Sudan.
Traders are also keeping a wary eye on the emerging scenario in Egypt. Hence a price shock could be round the corner, Stevens argues. And the argument put forward is simple.
To a very great extent Saudi Arabia has been endeavoring to balance the market, as was done in the mid 80s — before it opted out and the markets crashed. The question now is — how long Riyadh could sustain playing that role today?
And the in the meantime, news is pouring in that George Mitchell, the man widely credited with launching the US shale gas hydraulic fracturing revolution with his work in the Barnett shale of North Texas, died of natural causes at the age of 94.
The technology he pioneered in the 1990s over 10 years of experimentation has turned the US into an onshore oil-and-gas producing behemoth.
Rest in Peace, George!