Expert forecasts agree on slight rise in global oil prices for year ahead

10 April 2018

Global oil prices are predicted to rise moderately in 2018 according to a cross-section of industry CEOs, country projections, and institutional market forecasts compiled by global consulting firm Roland Berger, with most sources appearing to be in relative agreement.

The global oil price has seen ups and downs in the past decade, falling from a peak in 2008 of almost $140 a barrel to a little over $30 a barrel in 2016. The ups and downs have created a rollercoaster ride for producers, with various countries, many dependent on oil exports, being hit hard by the lower oil prices that have reigned since 2015.

For 2018, the market should see a minor improvement according to oil industry bodies and the historically most-accurate country forecasts, with the 2017 average barrel price of $51 ticking up to $54. While expectations fell a fraction short in 2017, the forecasts were marked by considerable divergence and the average distorted by an overly-bullish projection from Saudi Arabia – historically one of the most accurate country forecasters.Accuracy of oil price forecasts 2017In its latest annual oil industry forecast report, however, the sources of the Roland Berger review are in reasonable agreement for the year ahead, ranging from Iraq’s low of $47 to Saudi Arabia’s high of $59 for an average of $55. Conducted since 2007, the report considers the average projections of the top three-most accurate country predictors since 1999 – Saudi Arabia, Iraq and Nigeria – measured against a grouping of the foremost energy institutions in the NYMEX, EIA, and OECD.

While prior to 2009, the top-3 country grouping proved to be a more reliable source for oil price predictions, averaging a 12% error rate from 2002-2008 against the 19% error rate from the institutional grouping over the same period, the trend has since reversed – with the institutional rate at 12% from 2009 onwards and the country one blowing out to 27%. As demonstrated by the report, the swing in prediction accuracy from 2009 has coincided with the rise of the US as a major (shale) oil producer and exporter, with the role of oil-producing countries in controlling supply having diminished.Country oil price predictions compared to institutionsYet, while last year saw the country forecasts diverge wildly, by as much as ~$42 from Iraq against Saudi Arabia’s ~$72, for a combined top-3 country accuracy error rate of 20% as compared to the institutional groupings combined error rate of 8% (inflated by the OECD’s 19% undervaluation), the year ahead has both groupings falling at an average of $54.

There is also little divergence within the groups, with the NYMEX ($55) and OECD ($56) emerging relatively close to that of the EIA at $51, and the prediction from Nigeria, which along with the EIA and Iran was last year’s most accurate forecaster at just the ~1% out, falling right in the middle of the range at $55.Oil price forecasts 2018While the greatest disparity in predictions is between that of Iraq ($47) and Saudi Arabia ($59), the report notes that the Saudi Kingdom’s recent over-estimations are an intentional budgetary management effort to keep the public deficit as small as possible, with the petroleum sector accounting for 87% of the country’s public budget.

The projected moderate increase in oil prices for the coming year is also backed by the conservative upward price trend predicted by a number of CEO’s from some the world’s largest oil companies, including Shell, ConocoPhillips, Petrobras and BP – with the rise in barrel prices in line with the latter’s expectation of a continued rise in demand (to peak between 2025-2035), which last year saw the industry’s first period of undersupply since 2013.Peak demand for oil in next decadeAltogether, the recent production cuts by OPEC which have propped up oil prices have been balanced out by the growth in US production, effectively capping further rises. If peak demand predictions are accurate, the volume of US reserves may see this trend continue over the longer-term. “Looking at the currently proven reserves, U.S. corporations can maintain pressure on the price as a swing supplier well into the next decade – the time when some expect oil demand to peak,” Roland Berger senior partner Arnoud van der Slot said, “Hence, it is likely that prices will remain at current levels in the foreseeable future."

Earlier this year, a report from The Boston Consulting Group argued that the petrochemical companies of the GCC would need to consider consolidation to avoid stagnation in the face of persistent low oil prices and other challenges confronting the sector. 

Simon-Kucher & Partners to host Pricing & Strategy Conference in Dubai

28 March 2019

Strategy and marketing consultancy Simon-Kucher & Partners is gearing up for next month’s Pricing & Strategy Conference to be held on April 9th in Dubai.

Following a successful event last year which brought together more than 100 executives and managers from leading companies in the Middle East, the global strategy and marketing consultancy Simon-Kucher & Partners is gearing up to host the 2019 Middle East Pricing & Strategy Conference – set to take place on April 9th at the Jumeirah Emirates Towers Hotel in Dubai.

Covering topics around pricing, marketing and sales strategy, this year’s conference will feature a host of expert speakers, including Simon-Kucher CEO Georg Tacke, who last year led the firm past the €300 million revenue barrier with massive 24 percent growth. Joining Tacke will be UAE managing partner Lovrenc Kessler, along with Cairo-based senior director Martin Janzen and Simon-Kucher partner and board member Madhavan Ramanujam of the US.

Also appearing as guest speakers are a number of local industry executives, including Gillian Hamburger, Senior Vice President for the commercial operations of Expo 2020 Dubai; Amr Nagy, Schneider Electric pricing director for MENA; CEO Nisreen Shocair; and Sunbulah Group Corporate Finance Director Alaa Shousha, who will together form a panel on regaining customer confidence through pricing, marketing and sales strategies.Simon-Kucher to host 2019 Pricing & Strategy Conference in Dubai Elsewhere on the agenda, Kessler will speak on opportunities for monetising market trends in the challenging new environment of the GCC, Janzen will look at digital transformation and how to increase and monetise customer value, and Ramanujam will share inspirations and insights on monetising innovation from Silicon Valley Unicorns – with the firm having worked with more than 25 Unicorns (start-ups valued at over $1 billion) in North America.

Tailored specifically for executive leadership, senior management and marketing and pricing practitioners, the conference centres on the new and unique market trends which have emerged in the GCC during the past five years as the region continues its rapid transformation, with the firm stating; “We see an opportunity for companies to strategically leverage these trends through smarter marketing, pricing, and sales to return back to sustainable, profitable growth.”

Together with the keynote presentations and expert panel, the event will also feature a trio of industry-specific breakout sessions, covering the FMCG, financial services and B2B segments. Closing the conference, before a lunch get together for further networking, Tacke – who has more than 25 years of consulting experience and has independently or co-led Simon-Kucher & Partners since 2009 – will deliver an address on pricing excellence and the challenges ahead.

Tacke first joined the German-origin firm just three years after its establishment in 1985, and has been a partner since 1989. Today, Simon-Kucher has some 1,300 employees across 38 offices worldwide (with plans to add another 400 consultants this year in its push toward the $400 million revenue mark) with its Middle East offices established in Istanbul and Dubai in 2012 – the latter where Kessler has been based since its inception.