When discussing oil, the Middle East immediately comes to mind. It is at the core of multiple current events occurring in the world, politically, religiously, economically, and in the energy market; therefore, it is no surprise that at the Platt’s Global Crude Oil Summit, there will be a session dedicated solely to core trends in the Middle East oil markets. Having maintained a robust relationship with Platts for the past few years, ZE representatives regularly attend events hosted by Platts, including the Global Crude Oil Summit. We at ZE believe attending these events allows us to remain abreast of current events and the impact on data, allowing us to be a dynamic, proactive data management company. In a world of ever evolving markets, remaining current and ahead of future trends is vital, and ZE ensures it does that by remaining on top of current events. In this blog, we will look at a few of the topics that were touched upon in the summit, and discuss the possible implications of each.

 

Influential Global Market Player

It is estimated by the Institute for the Analysis of Global Security that 66% of the world’s oil reserves are located in the Middle East, while over 90% of its electricity is powered by fossil fuels; particularly oil and gas, as reported by Christian Hoffman at Siemens Energy. In such a strong position in the worldwide energy market, the core trends in the Middle East have a wide impact on the global energy market.

The Role of Politics in Middle East Energy Markets

Political tensions within the Middle East have historically threatened the strong hold OPEC has on crude oil. Throughout time, conflicts have arisen in the Middle East, increasing the volatility in the energy market. In particular, Syria, Libya, and Egypt are of particular concern at the moment. Although Syria itself is not a major player in the energy market, its civil war may have consequences on domestic and regional energy markets. The EIA reports that since the beginning of this year, Syria has suffered an economical loss of more than $20 billion as a result of the conflict. While domestically the conflict has been devastating, the effect on the global oil market has been less consequential to date. As CNN’s Steve Hargreaves reported, the actual fear is that oil production and transport in neighboring countries (which do produce a large amount of crude oil) will be affected by the war. Fortunately, the conflict has not spilled out beyond the border yet, but a close eye is kept on all developments surrounding Syria. Egypt is an example of a country that also went through major internal conflicts without any noticeable effect on their oil market. The 2011 revolution that occurred in Egypt and the unrest that has followed since have not affected the Suez Canal or the Sumed Pipeline, two major transport routes for oil and liquefied gas. However, not all countries are that fortunate. The conflict in Libya has oil at the heart of it. Rebels have been controlling major ports and oil fields, effectively blocking all of Libya’s oil, which is the holder of Africa’s largest proved oil reserves according to EIA. After recent negotiations between rebels and the government, one out of the four major ports in Libya has reopened and will be operating very soon. According to Reuters, this announcement caused Brent crude oil prices to fall, narrowing the Brent-WTI spread to the narrowest gap since September 2013, according to Market Watch.

Impact of US Shale Oil on Middle East Energy Market

Political tensions in the Middle East have had, and will continue to, affect the Middle East oil market, however the most current event that has majorly impacted the energy market comes from the West. The growth of U.S. shale gas and tight oil production has had the largest effect on the Middle East oil market in recent times, effectively redistributing the balance of power in the oil market. This revolution has increased the supply of oil while demand has remained relatively unchanged. According to the OPEC April Monthly report, demand for OPEC crude was revised downwards by 0.1 mb/d , which reflects the increase of non-OPEC supply while the global oil demand remains the same. This drop in demand for OPEC crude is especially prominent in the U.S., where crude oil imports dropped by 3% from one year earlier according to OPEC. The graph below, created in ZEMA, displays the total monthly U.S. Crude Oil Imports from OPEC Countries for the past four years. As distinctly demonstrated in the graph, the month to month imports are erratic, however it clearly displays an overall decreasing trend.

EIA Monthly US Crude Oil Import from OPEC

 

Although this does not mean the U.S. will stop importing crude oil altogether in the future, as tight oil production is relatively expensive, the source country may alter, disadvantageously to the Middle East. OPEC stated that Canada has been the top supplier for U.S. since 2006, accounting for 37% of total crude imports, Saudi Arabia is second, and Mexico is third. Total crude exports to the U.S. from Saudi Arabia have dropped by 57 tb/d since March, while Mexico increased by 3 tb/d. Imports from the Middle East are unlikely to completely stop, however the shale gas revolution has decreased the dependency on Middle East oil considerably.

Evolving Energy Markets

As a result of these external and internal events, the oil market is always changing. As markets continue to evolve, it causes rapid shifts in business-critical data. ZEMA’s strength lies in facilitating the capture, analysis, and integration of large amounts of market data. By leveraging ZEMA’s powerful automated data management functionalities, companies can confidently stay on top of rapid data changes and make better-informed organizational decisions.

To learn more about how ZEMA can help your organization stay compliant with changing regulations, book a complimentary demo.

 

 

Bibliography

Dittrick, Paul. “Market Watch: Crude oil futures rise on Libya, Ukraine concerns.” Oil & Gas Journal Accessed April 28, 2014. http://www.ogj.com/articles/2014/04/market-watch-crude-oil-futures-rise-on-libya-ukraine-concerns.html

EIA. “Suez Canal, Sumed Pipeline are key parts of Egypt’s role in international energy markets.” Accessed April 28, 2014. http://www.eia.gov/todayinenergy/detail.cfm?id=12371

EIA. Syria Analysis. Accessed April 28, 2014. http://www.eia.gov/countries/cab.cfm?fips=sy

Hargreaves, Steve. “Why Syria matters to oil markets.” CNN Money Accessed April 28, 2014. http://economy.money.cnn.com/2013/09/05/why-syria-matters-to-oil-markets/

Hoffmann, Christian. “Market Analysis Middle East: On the road to diversification, efficiency improvement and resource savings.” Siemens Energy Blog Accessed April 22nd, 2014. https://blogs.siemens.com/theenergyblog/stories/1306/

IAGS. “The Future of Oil”. Accessed April 22nd, 2014. http://www.iags.org/futureofoil.html

OPEC. “Monthly Oil Market Report. April 2014.” Accessed April 22, 2014. http://www.opec.org/opec_web/static_files_project/media/downloads/publications/MOMR_April_2014.pdf

Reuters. “Update 9-Brent crude tumbles as Libya exports rise; WTI gap narrows.” Accessed April 28, 2014. http://in.reuters.com/article/2014/04/28/markets-oil-idINL3N0NK11720140428

Ruhl, Christof. “The five global implications of shale oil and gas.” Energy Post Accessed April 22, 2014. http://www.energypost.eu/five-global-implications-shale-revolution/