Opec’s pact on crude production is a “fabulous Christmas present” for the oil and gas sector, an Aberdeen-based energy finance expert said yesterday.
Colin Welsh, the outgoing head of international energy investment at Simmons and Company, said the decision to cut production by 1.2million barrels a day from January could be the start of another “strong up-cycle” for the industry.
Mr Welsh said the agreement could convince operators to start spending again, which in turn would boost the supply chain.
He said: “As always, the devil will be in the detail. Is it just words or are they actually planning to cut? History would tell you there is a track record of cheating, so you could expect some of that.
“However, it’s a massive boost that will accelerate the recovery of oil prices and the uplift in spending in the oil services side of the business.
“It’s a very good opportunity for the service sector, whose capacity has been greatly reduced over the last two years.”
Mr Welsh did warn that the economy in the north-east of Scotland might not benefit immediately, however.
“There is likely to be a lag between this announcement and it percolating into service activity, but, not withstanding that, 2017 all of a sudden looks a lot cheerier,” he said.
“Hopefully, it’s the start of another strong up cycle.”
He also said industry analysts had inadvertently done more to destabilise the market in recent times than Opec members.
“There has been a lot of noise around whether or not Opec will agree to cuts,” Mr Welsh said.
“But actually, Saudi Arabia in particular has been consistent in saying it would cut.
“In many ways it has been the analyst community that has given the market the jitters.”