Are Crude Oil Prices Set to Go Volatile?

2016 wasn’t exactly a stellar year for the oil industry, with prices rising and falling faster than the US election polls. So what’s on the horizon for 2017? While some are quietly confident a recovery is on its way, others are warning that crude oil prices may turn volatile in the wake of OPEC commentary.

Just days ago, top-tier OPEC officials descended on Abu Dhabi for the World Future Energy Summit (WFES). As the world’s most influential energy event, the summit is dedicated to pioneering renewable energy, as well as advancing energy efficiency and clean technology.

Saudis set to invest heavily in renewables

One of the biggest developments is Saudi Arabia’s plans to invest up to US$50 billion in a massive renewable energy programme set to launch over the next few weeks. It’s underpinned by a goal to produce 10GW of power by 2023, with experts warning that the project could inspire catch-up volatility within the crude market.

Fossil fuels still a top priority

That said, Saudi Energy Minister Khalid Al-Falih was quick to confirm that the Kingdom won’t be neglecting its commitment to fossil fuels. While renewables are a priority, he reassured WFES delegates that in parallel to renewable energy programmes, Saudi Arabia will also be funding a host of fossil fuel power plant projects.

“Concentrating on renewable energies alone without recognising the crucial role of fossil fuels in addressing future energy needs would be a grave mistake,” comments Al Falih. “The world population is expanding and so are people’s income levels. Future demand cannot be sufficiently met by renewables alone.”

Saudis predict stability

A suite of keynote issues were on the WFES agenda, including whether or not extending the OPEC supply cut deal past mid-year is necessary. Al-Falih was quick to assert that such a move is superfluous, as stability should materialise within the first six months of 2017. He based his decision on the impressive levels of compliance by participating nations, as well as the outlook for a spike in global demand.  

“We don’t think it’s necessary, given the level of compliance we have seen and given the expectations of demand,” comments al-Falih. “Demand is going to pick up in the summer, and we want to make sure the markets continue to be supplied well.” He adds that “the re-balancing which started slowly in 2016 will have its full impact by the first half,” though admits that variables could come into play between now and June.

Ultimately, Saudi Arabia is a nation that relies heavily on its crude oil production. As such, it’s unlikely that the Saudis will do anything to jeopardise the market.  

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