The persistent oil price volatility is not a cyclical change, but rather a structural one. This is according to a survey conducted by Sea Asia 2017, where more than two-thirds of respondents said it wasn’t a cycle.
The results of the survey come at a time when the maritime industry faces its toughest period with oil prices falling by more than 70 percent since mid-2014 and with the recent supply agreement by OPEC to cut production.
This survey conducted ahead of the Sea Asia 2017 maritime and offshore conference and exhibition was carried out among maritime leaders to identify trends to shape discussions at the conference next April.
Jarand Rystad, a global expert on oil macro analysis and Managing Partner of Rystad Energy said the big debate right now is whether markets are in fact experiencing a structural change or a traditional cycle.
“The continued growth of US shale fields and recent significant reduction in costs to develop this resource clearly represents a structural change. The counter view is that shale alone still cannot balance the decline in supply globally. Therefore, conventional production from onshore and offshore will still be an important part of global supply growth beyond 2020,” said Rystad.
Regarding the recent OPEC production cut, Rystad added: “The surprisingly firm agreement by OPEC surely puts the cartel back on stage, but the relatively modest response in oil prices could be short-lived. In the coming years, oil prices will firstly be regulated by market forces. Balancing is also happening slowly but firmly from thousands of producing oil fields around the world.”
No pre-2014 prices
The Sea Asia 2017 survey also revealed that only a quarter of the maritime leaders expects oil prices (26 percent) and the maritime industry overall (25 percent) to return to pre-2014 levels in the next six months.
The respondents cited tonnage oversupply (83 percent), innovation (44 percent), and talent shortages (30 percent) as other critical issues facing the broader maritime industry in the current downswing.
It is important to note that, despite these challenges, over three quarters of those surveyed said they were confident in the industry’s long-term prospects.
David Roberts, Managing Director of specialist marine and energy insurer Standard Club Asia, said: “In the past, the industry has been too focused on growth at all costs, and through this downturn, we’re seeing a positive shift in attitudes towards achieving efficiencies, cost control, and sustainability. Companies should also take care not to reduce operational capacities too greatly, as they may find themselves behind when the market rebounds.”
A majority of maritime leaders surveyed by Sea Asia 2017, 85 percent of them, said that they are focused on talent development, following extensive downsizing across the industry while waiting for an eventual upturn. Tighter control of costs, greater industry collaboration, and research and innovation were also identified as the top priorities in the next 12 to 18 months.
Seatrade Chairman, Chris Hayman, said the survey results clearly show that players across the industry are facing a challenging time, and there is a real desire for collaboration in key areas.
Hayman said: “During the downturn, most leaders have said they will focus on innovation and talent up-skilling to meet future challenges. In this environment, our conference themes for Sea Asia 2017, including technology and smart shipping, will provide a critical platform for discussion and debate, and will bring together exhibitors from across the region with new technologies and skill-sets.”
The 6th Sea Asia maritime and offshore conference and exhibition will be held in Singapore at the Marina Bay Sands in Singapore from April 25-27, 2017.