11.08 2018

Oil in Algeria: Analysis

Algeria
Photo Oil in Algeria: Analysis

The oil sector in Algeria has had some highs and lows for some time and this is not about to end. This situation ensures real growth in the country's GDP (Gross Domestic Product) and are warning the investors. Remember that the Algerian government had adopted an economic growth plan (2016-2030), which makes the entrepreneur a privileged partner of the public authorities. The initiative is good, although much more is needed to put investors in trust.

The last quarter of 2017

The economic performance of Algeria has suffered greatly from the unstable evolution of the oil sector over the last year. If the first quarters were less agitated, we can not say the same for the last ones. The OPEC (Organization of Petroleum Exporting Countries) report released last November shows a sizeable drop in oil production between September (1,050 million barrels) and October (1,012 million barrels).

This decrease did not last long with OPEC's recovery policy, which stipulates the decline in oil production in exporting countries. The report delivered by the organization at the beginning of the year shows a rise in the price of Sahara Blend, Algerian oil, between November and December. This is simply the biggest increase in the OPEC basket since 2011.

The global market for rebalancing

The growth of the Sahara Blend price continues and this could take on a new dimension in the months to come. Member of OPEC, Algeria will comply with the agreement established between all member countries of this organization to maintain the balance of the market. This agreement stipulates the reduction of oil production by all exporting countries in order to influence supply and demand. The net result would be a change in prices on the market.

Last week, the oil price reached its highest level since 2014 due to the decline in the number of wells operating in the United States and unrest in Iran. We can already imagine what will happen when OPEC member countries reduce their production. Companies producing on a large scale like HBS International, headed by Tunisian businessman Tarek Bouchamaoui, will reduce their production with a unique chance to obtain a higher turnover.

The repercussion of the OPEC agreement

The agreement reached between OPEC members will take effect from March 2018. All the countries concerned will have to comply with it and agree to see their oil production fall. Algeria will in this way experience a further decline in production, but that will certainly not have the same effect on GDP.

With the new law, the reduction of production is general and the demand increases with the consequence of the recovery of prices. The price of the Sahara Blend will increase in value and could exceed the level reached in December 2017 (evolution of more than 19%).

As a conclusion, the great investors like Tarek Bouchamaoui, leader of the sector in Tunisia and other Maghreb countries, will take advantage of this agreement.