Oil Prices Under Structural Change, Says Sea Asia 2017 Survey
December 08, 2016 17:02 PM
By Massita Ahmad
SINGAPORE, Dec 8 (Bernama) -- More than 70 per cent of maritime leaders in Asia now believe the persistent volatility in oil prices represents a structural change rather than cyclical movement, says the Sea Asia 2017 survey.
The results come as the maritime industry faces its toughest period yet - with oil prices falling more than 70 per cent since mid-2014 - and with the recent agreement by the Organisation of the Petroleum Exporting Countries (OPEC) to cut production.
The survey was carried out among the maritime leaders to identify trends to shape discussions at the Sea Asia 2017 next year.
The Sea Asia is the premier maritime and offshore conference and exhibition in Asia which will return for the sixth edition from April 25 to 27, 2017 at the Marina Bay Sands here.
Jarand Rystad, a global expert on oil macro analysis and Managing Partner of Rystad Energy, said the big debate right now was whether markets were, in fact, experiencing a structural change or a traditional cycle.
"The continued growth of the US shale fields and recent significant reduction in costs to develop this resource clearly represents a structural change," said Rystad as quoted in the survey.
Rystad, who will be one of the speakers at the Sea Asia 2017, said the counter view was that shale fields alone still could not balance the decline in supply globally.
Therefore, conventional production from onshore and offshore would still be an important part of the global supply growth beyond 2020, he added.
On the recent OPEC announcement to reduce production, Rystad said: "The surprisingly firm agreement by OPEC surely puts the cartel back on stage, but the relatively modest response in oil prices could be short-lived.
"In the coming years, oil prices will firstly be regulated by market forces. Balancing is also happening slowly but firmly from thousands of producing oil fields around the world."
The Sea Asia 2017 survey also revealed that only 26 per cent of the maritime leaders and 25 per cent of the maritime industry expected oil prices to rebound to pre-2014 levels in the next six months.
The industry is also expected to face other critical issues with 83 per cent of the leaders citing tonnage oversupply, innovation (44 per cent) and talent shortages (33 per cent).
Despite these challenges, 77 per cent of the leaders said they were confident in the industry's long-term prospects.
Managing Director of The Standard Club Asia Ltd, David Roberts, said it was important for maritime companies to use the period for reflection and to keep a long-term view.
"In the past, the industry has been too focused on growth at all costs and through this downturn we're seeing a positive shift of attitudes towards achieving efficiencies, cost-control, and sustainability.
"Companies should also take care not to reduce operational capacities too greatly as they may find themselves behind when the market rebounds," he added.
In preparation for an eventual upturn, 85 per cent of the maritime leaders are focusing on talent development, following extensive down-sizing across the industry.
Tighter control of costs, greater industry collaboration, as well as research and innovation were also identified as top priorities for leaders in the next 12 to 18 months, said the survey.