Who stands to gain from output cuts

Who stands to gain from output cuts

Elisa Maria Giannetto
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Europe and China take advantage of the drop in oil shipped out of the Middle East to aggressively expand their own exports

On one hand, OPEC’s decision to cut oil production; on the other, record volumes being shipped to Asia from the North Sea and Azerbaijan. Europe and China are moving against the grain by deciding to increase oil exports by 22 million barrels last month. According to Reuters, this record output is intended to fill the gaps left in 2017 by OPEC’s move to curb the export of oil from the Middle East. ''Asia needs oil, Europe has it'', as one Reuters source put it. ''The OPEC cut has raised prices, and that now makes it profitable to send European oil to Asia''. Oil companies are anxious not to miss this opportunity. According to a survey conducted by Wood Mackenzie, the major operators are willing to spend more in 2017 and plan to develop more than double the number of large projects (those involving a +50 million dollar investment) as last year. This optimistic climate comes after the price of oil rose by over 20%, reaching 55 dollars per barrel. The first projects to be started will be off the coasts of Guyana and Brazil and in the Gulf of Mexico. "The real market battleground is East of Suez," said John Driscoll, director of energy consultancy JTD Energy Services, referring to the Suez Canal through which many tankers ship oil between Europe, the Middle East and Asia.