Demand for products in the oil and gas sector will be driven by the Middle East and Asian economies, as the western countries experience slowing growth, particularly in the US and the debt crisis in Europe, Saeed Abdullah Khoory, the Chief Executive of Emirates National Oil Company (Enoc) has said.
While addressing delegates attending this year’s annual Middle East Petroleum and Gas Conference in Dubai, Khoory predicted a slump in oil demand in developed nations, saying the Middle East and Asian countries would be able to offset any reduction.
“The increased ties between the Middle East and the growing Asian nations will drive oil trading, which will make up for any demand reduction from the developed nations, which are witnessing sluggish economic activity,” Khoory said.
According to the International Monetary Fund (IMF), expected increase in oil prices and production volumes will lead to higher growth in 2011 and stronger fiscal and external balances for most oil exporting countries.
Statistics provided by the lender show that average real GDP growth (excluding Libya) is projected to reach 4.9 per cent in 2011 compared with 3.5 per cent in 2010, while non-oil growth is projected to stay at 3.5 per cent in 2011.
“For the GCC, growth is projected to reach 7.8 per cent in 2011 as oil production expands to stabilise global oil supply in the face of supply disruptions elsewhere,” it says, adding that GCC non-oil growth is set to accelerate by more than 1 percentage point to 5.3 per cent in 2011.
No enough jobs for growing labour force
Recent developments on the issue of sovereign debt in Europe and weakening US economy have brought about concerns of a possibility of a ‘doubledip’ recession. IMF says that until late 2010, the global economy was on track for a recovery, however, the slow growth equilibrium of the past years did not generate enough jobs for the growing labour force.
“For economic growth to be sustainable, employment opportunities must be inclusive and broadly shared, and not just captured by a privileged few,” it says.
Growth in the region accelerated to 3.9 per cent in 2010 from 2.1 per cent in 2009, mainly driven by the Middle East’s oil exporters.
Globally, economic growth is forecast to be about 4.5 per cent in 2011, down modestly from 5 per cent in 2010, while real GDP in advanced economies and emerging and developing economies is expected to expand by about 2.5 per cent and 6.6 per cent, respectively, according to the IMF.
“In advanced economies, the handoff from public to private demand is advancing, reducing concerns that diminishing fiscal policy support might cause a “doubledip” recession,” the institution says.
Debt crisis big concern for oil producers
During the petroleum and gas event in Dubai, the UAE’s governor for Opec Ali Obaid Al-Yabhouni also raised concerns about the ‘ominous clouds on the horizon,’ saying the current economic slump and sovereign debt situations may affect oil demand.
“The debt crisis in some countries in Europe, especially Greece, is a big concern for oil producers here,” Al-Yabhouni said, adding that he foresees no major slump in demand.
Khoory predicted that demand for petroleum products is expected to rise to 90.7 million barrels per day in 2012, “which is an all time high.”
“A large part of this strong demand will be driven by the non-OECD (Organisation of Economic Co-operation and Development) countries with Asian economies taking the lead followed by the Middle East,” he explained.
On the supply side, the Enoc executive said the Middle East will continue to maintain its lead position due to massive investments in upstream and downstream sectors.
“Our analysis of the market suggests that the global economic activity might continue to grow albeit at a very moderate rate. Policy makers will continue to take decisive measures to protect the fragile recovery,” Khoory added. He also said that Dubai’s core sectors – trade, tourism and transport - have supported overall economic growth.
“The aviation sector has in particular been a driving force and we anticipate it to remain one of the strongest growth pillars of Dubai’s economy,” he added.
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