Oil price recovery will help LNG price

The recovery in oil prices is highly dependent on the success of the Organization of the Petroleum Exporting Countries (OPEC) and its allies’ agreement to slash oil production.

The recovery in oil prices would see major impacts on PNG’s economy with increased revenue from oil and liquefied natural gas (LNG) sales.

The fall in oil prices has been a double blow for PNG, with revenue from petroleum production suffering as well as LNG from the PNG LNG Project.

According to the International Monetary Fund (IMF), LNG prices are directly linked to oil prices and any change in the latter affects the former.

With a predicted recovery in oil prices, revenue increases are expected from LNG sales and this may have a significant impact on the budget, growth rate and balance of payments and international reserves.

The historic OPEC agreement, signed in December 2016, has oil giants Saudia Arabia pledging to slash 480,000 barrels of oil per day (bopd), non-OPEC members agreeing to cut production by 558,000 bopd and Russia agreeing to slash around 250,000 bopd.

According to Energy News Bulletin, the International Energy Agency (IEA) says the excessive amount of oil flooding the market will begin to ease in the first half of 2017 if OPEC and its partners stick to the agreement.

This will see the reinforcement of prices and revenue stability for producers after two difficult years, according to the IEA.

The World Bank and investment group, Goldman Sachs, are optimistic oil price will average $55 (K164) per barrel.

LooPNG/Picture: Forbes
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