Plunging oil price piles pressure on George Osborne’s autumn statement
Opec decision not to cut quotas prompts slump in Brent crude price and calls for North Sea tax breaks to save jobs
The cost of Brent crude slumped below $76 per barrel – a new four-year low – on Thursday as Opec signalled it would not be introducing production cuts on the cartel dominated by Middle East producers.
“Every decrease by a dollar is a negative for the North Sea. Lower oil prices are not good for anyone in the industry and they could endanger jobs, there is no doubt about that,” said Uisdean Vass, oil and gas partner at law firm Bond Dickinson. Earlier this week an Oil and Gas Survey conducted by Aberdeen & Grampian Chamber of Commerce and sponsored by law Bond Dickinson, showed that for the first time since 2008, more operators and contractors were pessimistic about their North Sea activity than optimistic.
James Bream, research and policy director at Aberdeen & Grampian Chamber of Commerce, called on the chancellor to introduce new tax breaks at the autumn statement on Wednesday.
“Companies are not convinced they can get a fair return on their investment and in a global industry, it is very simple for them to move their capital elsewhere. The government must be aware that decisions in the next few months will also have a major impact on the £35bn supply chain that exists in the UK.”
Oil & Gas UK, the offshore industry’s lobby group, estimates that 440,000 people are employed directly or indirectly around the UK as a result of oil and gas extraction.
The slump in oil prices, which originally started in June on the back of increasing output from US shale operators at a time of lower demand combined with a stuttering of global economic growth.
Daniel Ang, an investment analyst with Phillip Capital in Singapore said that a “consensus” reached by Saudi Arabia, Kuwait, Qatar and the United Arab Emirates indicated there would be no output cuts on Thursday.
“Dreams of rising oil prices [have been] smashed with pre-Opec meeting sentiments. Brace yourselves for lower oil prices,” he told Reuters while UAE oil minister, Suhail bin Mohammed al-Mazroui, told the FT that the market will, eventually, fix the oversupply in the oil market. “I don’t think we should panic. There is nothing that should cause us to panic.”
Kuwait said that Opec can cope, whether the oil price is $80 or as low as $60 while Saudi Arabia’s oil minister, Ali Al-Naimi, told reporters that Opec will take a “unified position”. This follows days of leaks suggesting producers would not slash output.
Venezuela’s foreign minister, Rafael Ramirez, took a swipe at America’s burgeoning shale industry as he arrived at the Opec meeting, suggesting it should be reined in: “The US is producing in a very, very bad manner. The shale oil, I mean it is a disaster from the point of view of climate change ...”
Marc Ostwald of ADM Investor Services warned that another slide in the oil price would have serious consequences for countries such as Russia whose economies are heavily dependent on commodities.
- The Guardian
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- November 27, 2014
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