X Close

UCL Energy Institute Blog


Blogs by staff & students of the UCL Energy Institute


Oil Producers Meeting in Doha, Qatar: Technical opinion

AndreasEconomou14 April 2016


The objective of the so-called Doha Meeting in Qatar, on April 17, between the world’s top oil producers is fairly straightforward: to agree on a collective OPEC and non-OPEC oil output freeze to January 2016 levels, in an effort to halt the nearly two-year oil price collapse. Yet, the actual scope of the agreement is way less ambiguous and far more OPEC-specific.

Amid the most dramatic quarter since the price fall (1Q2016) – i.e. prices hovering below $30/bbl to a 13-year low, a persistent supply-driven bear market, global economic growth forecasts being downgraded and a deep contango encouraging stocks to rise above 5-year average – Saudi Arabia, Venezuela, Russia and Qatar have revived a very well crafted “As-Is Agreement”. The terms of the agreement are relatively painless for the participating oil producers, which are already producing near their capacity limit and near their average forecast levels for 2016 –see Table 1. For all oil producers, excluding Saudi Arabia and Iran, announcing that they will not increase production in the near-term, confirms merely what was already known given the global squeeze on capital resources towards upstream developments. (more…)

What would be the impact of the April 17 OPEC meeting on the UK electricity market?

GiorgioCastagneto Gissey13 April 2016


A freeze in output would stop adding to the excess supply that has caused prices to collapse from levels above GBP 70 per barrel seen in June 2014. Oil is very rarely used for electricity generation, only about 1-2% of the times in the UK. Given that the UK electricity system is based on the merit order of electricity generators in the country – i.e. the marginal cost of producing an extra unit of electricity, by which electricity generators with progressively higher costs are dispatched as demand increases, in order to minimise prices for consumers – oil is always used as a last resort because it always has the highest cost. In such a system, when the marginal generator is used it always sets the price. Thus, when oil is used it always sets the electricity price. (more…)