What does OPEC’s agreement mean for us?

2nd December 2016

At OPEC’s 171st meeting in Vienna this week, it agreed to reduce oil output for the first time in 8 years. Although this has been largely welcomed by an industry on its knees, there is still scepticism about what lasting impact the measures will have and whether they have gone far enough, because of the large surplus of supplies still available. Neil Wilson on ETX Capital said "Compliance is key and it's worth noting that OPEC members don't have the best record on that front"*. Mr Wilson also said oil-producing countries that were not party to the deal, such as the US, were likely to increase production as prices rose, offsetting efforts to curb oversupply.

Nevertheless, markets responded quickly with the price of Brent and US crude jumping by almost 10%. The trend has continued for a second day.

However, for a sector which has suffered a downturn of as yet unforeseen proportions and to medium size geophysical contractors like us, this decision is encouraging news and may hopefully mean a significant and sustained cash injection into the sector should the cuts have the desired effect. Although the geophysical services suppliers not out of the woods yet, in a tough financial climate Shearwater have achieved success in attracting new investors and winning the highly sought-after ONGC contract, so yesterday’s OPEC announcement is another step in the right direction for us.

When you consider findings from a recent survey conducted by the Aberdeen and Grampian Chamber of Commerce, demonstrating the negative impact the recent severe downturn has had on the city’s workforce and economy, Shearwater’s story is even more impressive. We have a well-dimensioned company for the current market with key departments poised for increased capacity as the market improves.

In short, nothing is certain but the initial indicators are good and Shearwater is ready.

OPEC meet again in May 2017 to monitor progress and we will be watching closely.

Written by Maria Meades, Sales Coordinator at Shearwater GeoServices