Mohammad Sanusi Barkindo
long history, the oil industry has certainly seen
periods full of challenges and others laden with op-
portunities. But the significance of 2016 stems from
the convergence of so many different factors and the
subsequent response at year-end of various energy
stakeholders around the world. This lengthy and re-
warding process culminated with a series of decisions
and the renewal of broad-based optimism over the
near-term oil market prospects.
At the start of 2016, things had been much differ-
ent. Producers and consumers alike had increasingly felt
the pressure of apersistent oilmarket downturn,marked
above all by a dramatic price decline. This had begun
in mid-2014, continued throughout 2015 and was pro-
longed during 2016, making it one of the oil industry’s
longest, most recent and protracted down cycles.
Unlike previous cycles, however, this recent cycle
had been significantly supply driven. However, while oil
supply growth had been outpacing demand growth for
several quarters, global inventories during the year had
begun to fall. In fact, over the course of the year, com-
mercial stocks had fallen from 380 million barrels (mb)
in February to below 300 mb by the end of the year.
Nevertheless, adverse conditions in the oil mar-
ket and, to a far lesser degree, in the global economy,
continued to weigh on the industry.
Investments in the oil industry declined by 26% in
2015 and by 22% in 2016. This made for quite difficult
conditions across the whole value chain. As a result,
many companies faced financial and operational chal-
lenges, and job losses were seen across the industry.
In terms of oil demand growth, conditions in 2016
were comparatively healthy. Driven in part by a return
to robust economic growth in major consuming coun-
tries and by ongoing demographic and transportation
trends, oil demand growth performed better than ex-
pected in OECD Asia Pacific and Europe.
Overall, the global economy was relatively healthy
during most of 2016, with solid improvements in the
growth dynamics seen mostly in OECD economies. The
economies of some leading developing countries also
seemed to have been slowly coming out of a recession
in 2016, while economic growth in other countries re-
mained rather robust for most of the year — despite
some dampening of domestic consumption.
Given recent macroeconomic indicators as elabo-
rated on in OPEC’s recent
Monthly Oil Market Report
is worth mentioning that oil demand growth is expect-
ed to remain quite solid in 2017 as well.
Yet despite the relatively positive and supportive
global economic environment, the oil industry in 2016
continued to labour under significant pressure. The
global oversupply and widespread price downturn had
been too burdensome, and both consumers and pro-
ducers alike had experienced their negative impacts.
This led to the widespread recognition that for the sake
of the industry and the future stability of supply, things