Trump move could bring respite for North Sea operators
Less than three months in to the OPEC brokered production reductions, but there are already signs of cracks appearing as crude prices fell by around 10% last week. Coupled with President Trump’s re-opening of US waters to include “all available” federal waters in the Gulf of Mexico that have not already been leased out for offshore oil drilling and recent new discoveries in onshore Alaska – the largest find in 30 years, the view that oil will either rise or stay at around $55-$60 this year is beginning to look a little shaky. A week ago, US Interior Secretary Ryan Zinke announced 73 million acres off the coast of Texas, Louisiana, Mississippi, Alabama, and Florida would be offered at a lease sale in August as part of the Interior Department’s five-year leasing plan. “Opening more federal lands and waters to oil and gas drilling is a pillar of President Trump’s plan to make the United States energy independent,” Zinke said in a statement. The oil market’s fall last week was due more to the failure of the agreed reductions to be maintained than to the US announcement which will have a longer term impact. It would appear o Saudi Arabia is bearing the heaviest load, while Russia in the non-Opec group has barely reduced at all. The possibility of a US interest rate rise this week pushing the dollar higher will also bring pressure to bear on crude prices. The deal agreed at the end of last year expires in June although a meeting is planned in May to discuss developments. Within OPEC Iraq is planning to increase production. US shale has also increased and with some contracts tied in to current prices, there is small chance of a reduction in output. For the offshore sector, the new US leasing arrangement provides optimism for both North Sea and US Gulf operators. Although there will be only a few opportunities for European operators to find employment in the US, the recall of vessels from the North Sea that can operate in the US will be a bonus at home.