THE beleaguered Scottish oil and gas industry has been offered a glimmer of hope after a rise in price of crude following a deal by the Organisation of the Petroleum Exporting Countries (Opec) to cut production for the first time in eight years.
Experts have reacted with cautious optimism to the news, which could mean the bottom has now been reached for firms operating out of the north sea.
The price of Brent crude rose to $50 a barrel yesterday afternoon after news of the agreement to curb supply was released.
However, even a full Opec cut is unlikely to restore oil prices to the levels seen two years ago, before increased output from the US and other non-Opec countries led to oversupply.
Deirdre Michie, chief executive of the Aberdeen-based Oil & Gas UK believed the decision by OPEC was "welcome news".
She said: “While industry has demonstrated resilience and determination to adapt to a lower for longer oil price environment, an increase in prices would certainly be welcome news in these challenging times.
“While there is no guarantee that today’s decision by OPEC to reduce oil supplies will translate into a sustained price increase, there are positive signs from the market, with Brent up 8.6 per cent at around $51.
"There was a similar rally in September when OPEC last moved towards reaching an agreement on cutting supply, so everything depends on the durability of the supply cuts.”
Opec president Mohammed bin Saleh al-Sada said it had reached a deal which would support the "general well being and health of the world economy".
"With the cooperation of and understanding of all member countries we have been able to reach an agreement," he said.
He added that the cartel had considered the need to encourage investment in oil production and secure the long-term security of supply, and confirmed that Saudi Arabia - the biggest Opec producer - would take the lion's share of the cut, agreeing to trim 486,000 barrels from its production of more than 10 million barrels a day.
Brent crude prices have fallen nearly 50 per cent since their peak of around 100 US dollars a barrel in June 2014.
The slide in prices has delivered cheaper petrol at the pumps for motorists, but hammered the financial performance of blue-chip energy firms and companies working out of the North East, leading to widescale job losses.
Aberdeen-based Bob Ruddiman, Head of Energy at legal firm Pinsent Masons, was upbeat that a corner could now be being turned.
He said: “After intense discussions and palpable tension across global oil hubs, progress has clearly been made today.
"While a firm agreement backed-up by a specific country-by-country break down of production adjustments represents a positive shift in gear from OPEC, this in itself is unlikely to provide a solution to the underlying issues prompted by long term price volatility.
"Indeed, this is not the end of the story. With the detail of the non-OPEC country reduction target of 600,000 somewhat hazy at this point, more meat on the bones is critical to understand the genuine mid to long term impact of this agreement.
He added: “From a North Sea perspective, while a price a hike would be welcome, we’re seeing some of the leaner, more nimble North Sea players begin to acclimatise to the lower for longer environment.
"Some recent E&P acquisitions and signs of an uptick in oilfield services M&A demonstrate confidence that some investors will support those businesses that are well-equipped to weather the storm with or without an OPEC production cap.”
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