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The region gets ready to invest heavily in downstream refining as oil inches to $80

Can you feel it? The push to $80 oil is on and the region is ramping up investments to meet demand

US crude stockpiles jumped by more than 5.5 million barrels in the week ended April 19 as per the Energy Information Administration (EIA) report Even $70 oil is not enough to balance Saudi Arabia’s books over the long haul In the UAE, upstream oil investments are set to reach $20 billion, targeting 4 million bpd capacity by 2022

Before going to $80, oil will bound up and down, oscillating between fears of supply disruptions and worries of supply capacity

Today the story is of prices going down, but tomorrow the story is about investing.

Oil down… 

Brent crude futures were at $74.53 per barrel down 4 cents from last close while WTI futures were at below $66 a barrel, down 14 cents respectively.

The prices reacted to US crude stockpiles jumping by more than 5.5 million barrels in the week ended April 19 as per the Energy Information Administration (EIA) report.

US oil production now stands at 12.2 million barrels a day.

…but not out

Saudi, OPEC’s biggest producer, is eyeing near $80 oil prices per barrel, spurred on by a number of factors including  production cuts of 1.2 million barrels per day (bpd) of oil from global markets as of January , output losses coming from Iran and Venezuela from U.S. sanctions, and also loss of output in Libya currently witnessing armed conflicts.

Riyadh doesn’t comment on what oil price they would like to see, according to OilPrice.com, and is quite adept at a playbook where it raises and cuts production to keep markets balanced, under the umbrella of OPEC.

“However, the International Monetary Fund (IMF) said in February that even $70 oil is not enough to balance Saudi Arabia’s books over the long haul and that Riyadh needs oil between $80 to $85 per barrel – the so-called fiscal break-even point,” said Oilprice.com.

Oil investments in Region

According to Zawya, of the $304 billion of total investment In the oil sector, $166 billion worth of projects are at the planning stage, while $138 billion has been committed.

“Iraq is now leading the push downstream as it looks to ramp up production from existing and new refineries with $25 billion of committed investments.  Upstream, the OPEC member is pursuing a higher production target of 6.5mb/d (million barrels per day) by 2022,” Zawya reported.

In the UAE, upstream oil investments are set to reach $20 billion, targeting 4 million bpd capacity by 2022, while Kuwait has a similar target for 2020, as per a report by Apicorp.

Saudi Arabia is building the first crude-oil-to-chemicals (COTC) in the region at an investment value of $20 billion. The Saudi Aramco/SABIC complex is likely to be commissioned in 2025. Saudi Arabia has plans to develop its unconventional gas reserves and to increase production from 14 billion cubic feet per day (bcf/d) to 23 bcf/d by 2030, according to Apicorp.

“In the gas sector investments will amount to $186 billion, of which just under half—$87 billion— is committed investment, Zawya reports.

Meanwhile, Reuters reports that Saudi Aramco will remain active in the debt markets after its debut $12 billion bond earlier this month, which received more than $100 billion in orders by April 9.