The Organisation of Petroleum Exporting Countries (OPEC) has reported a five-year low in terms of annual revenue.
The 12 member countries slipped below $1 trillion last year for the first time since 2010, showing the impact that the crude oil price slump has had on these wealthy economies.
The countries, which include the likes of Saudi Arabia, Qatar and United Arab Emirates earned $993.3 billion in 2014, down 11 percent on the previous year.
The figures, which appeared in the organisation’s annual report, also show that the combined current account balance dropped by 35 percent to $273.6 billion as the drop in exports was accompanied by an increase in imports.
The Saudi Arabia-led strategy of defending market share instead of prices now appears to be hurting some of these countries which depend on petroleum exports for the health of their economy.
OPEC nations agreed on June 5 to keep a production limit of 30 million barrels a day, a level they have exceeded every month since June last year, according to data compiled by Bloomberg.
“Given the weakness in the first half of the year, another sub-one-trillion-dollar revenue year remains on the table,” Hamza Khan, an Amsterdam-based senior commodity strategist at ING Bank NV, said by e-mail Wednesday.
Bloomberg reports that he also said the impact on the government finances of some OPEC members could be mitigated by increased production and foreign direct investment.
What does this mean for gas buyers?
Although it may not be immediately obvious, the price for gas is heavily connected to the price of oil. This means that any news coming from the largest oil producing nations should be on the radar for volume gas-buyers.
So what do falling OPEC revenues tell us about the future price of gas? If only the answer was black and white.
Unfortunately, OPEC nations are a fairly unpredictable bunch and many of their negotiations are carried out behind closed doors. This means that any OPEC speculation is precisely that, speculation.
Earlier in June, the members reaffirmed their commitment to keep oil production at a quota of 30m barrels per day in a bid to squash competition from American shale oil producers.
“They want to keep the price low enough to keep US shale-oil producers from producing,” said Charles Nedoss, senior market strategist at LaSalle Futures Group and indicators suggest that this strategy is working to a degree.
Mr Nedoss continues: “they’re dealing with something they’ve never dealt with before, the fact that someone else can step-up production.”
While OPEC market share has increased compared to last year and while American production appears to be slowing, some inside OPEC will want to continue with the artificially low prices.
However, according to data compiled by Bloomberg, “almost all the group’s members aren’t earning enough from current oil prices to balance their budgets”.
There is no doubt that some inside of OPEC are beginning to balk at the falling revenues. Particularly among the economies which depend heavily on oil exports.
Venezuela, who was initially one of the country’s most in favour of curbing production, appears to have changed its mind. Their Oil Minister has suggested that the oil market will stabilise before the end of the year and the President recently announced plans for more than $14 billion in domestic oil projects.
If the blowing winds can be trusted then we might expect oil and gas prices to rise at some point in the not-too-distant future. Watch this space.
For more energy market analysis, speak to a member of the Business Gas.com energy team. Call: 0800 157 7157
Our expert advisors are used to handling questions about our Gas Buying Group. Below, we’ve tried to answer some of the questions that we get asked most often.
What is a Gas Buying Group?
A gas buying group is an amalgamation of businesses with the purpose of negotiating cheaper gas prices through purchasing collectively. Approved group members team up to buy gas in greater volumes – at the best possible price.
Do I Fit The Bill?
To qualify for our larger buying group your business needs to use a minimum of 100,000kwh of gas per year. This can be split across multiple sites, as long as the total consumption of all sites is above 100,000kwh. We also have a smaller gas buying group for businesses that do not meet the 100,000kwh threshold.
Am I Under Any Kind of Obligation?
If our offer to you is less than 7.5% cheaper than your current rate then you are under no obligation to accept, so there’s nothing to lose.
What if My Current Contract Ends in June?
The buying group contract ends on the 30th September each year. However, if your existing contract with another supplier ends at any other time, we can offer you a short term contract that will expire at the send of September – so you can still enjoy the benefits of buying in bulk.
How do I Join the Buying Group?
To join the Business Gas buying group just speak to one of our advisors on 0800 1577 175 and they will handle all of the admin work. Once you’re in, the day-to-day management of the contract is minimal.
Is it free to Join?
Yes!
What about Something to Sweeten the Deal?
When you sign up we’ll give you a gas smart meter AND a full years daily online reporting AND a bill validation system – all for free!
So let me get this straight, I’ll get a better price on my gas, a brand new ‘smart’ gas meter and a free gas logger and all I have to do is pick up the phone?
AND the more we buy, the cheaper it gets!
If you’re interested in joining our buying group and making fantastic savings on yout business gas, call us now on 0800 157 7175!
As consumers, we operate in a marketplace driven by cost pressures. That is especially true at Christmas. Black Friday bore witness to the willingness in human beings to clamber all over one another, just to find a bargain. Equally, the relatively new online culture means we now let our fingers do the legwork (if you see what I mean), finding the best prices for whatever it is we’re looking to purchase.
A website such as Kelkoo will scout the market for the best prices for most electronic devices and that kind of aggregating of cost carries over into the business energy market… although not, of course, stretching to anything like the chaos of Black Friday. In a domestic context we are well versed in the art of ‘switching’ – of shopping around for the most competitive supplier of energy. The same is true of the business energy marketplace, although there are, perhaps, one or two extra things you need to bear in mind.
The bottom line is that gas suppliers are, themselves, a business, serving other businesses, and the prime motivator for everyone is to make money. Bearing that in mind, if you simply let your contract run down, and then renew, it is highly unlikely your supplier will be at all motivated to help you save money. It’s business. If they can make an extra 10 or 20% from your contract, they will do that.
Always push for a better deal
The first thing, therefore, is always to push back and ask for a deal on rates. Even then, the supplier will look to offer you the best price they can get away with offering you. Many businesses will be happy with any kind of reduction, viewing it as a victory when, in reality they might have been able to push for much more. For example, if you’re paying 2.95 pence per kwh and negotiate 2.65p, you may well see that as a successful negotiation. In reality, the supplier may well have dropped to 2.35p per kwh… and still made money.
For many, however, such negotiations are labour intensive, requiring the kind of specialist knowledge they simply don’t possess. Equally, many businesses don’t have the time, and really need someone to take on the research, and negotiations, on their behalf. That’s where a broker like BusinessGas.com comes in.
Look at the bigger picture
When you contact one of our consultants you will, of course be looking for more competitive rates than you are currently on. But sometimes it’s not as simple as it may seem. For example, in a recent case one of our pricing team scoured the market on behalf of a client who used 518.941 Kwh of electricity per annum. One supplier offered a price of 3.986p per Kwh with no standing charge; another, 2.31p per Kwh but with a standing charge of £5.86 per day. At first glance the standing charge might, at face value, look prohibitive. However an expert in the market will be able to calculate that at that level of annual usage, the saving on the price per Kwh will actually still amount to £6,556.88 each year. And that can be a hefty amount to many businesses.
And that is why trusting the decision to BusinessGas.com means putting your business in the hands of the professionals, who know the sector, know the marketplace and can quickly do the sums.
And, in turn, that frees you up to spend time on other crucial aspects of your business… such as the finishing touches to the staff Christmas do! And with these savings, you can even keep the Christmas lights on…
Does your present gas contract end between December and May? If so, the chances are you will be renewing your gas contract in October or early next year – in other words, Winter.
Why is that significant? It’s still not common knowledge but if you negotiate your business gas contract in the colder months, you could be paying significantly more than if you negotiated in the summer months.
The weather can have a huge impact on gas prices. And it’s logical when you think about it. When you come in from work at night, unless it’s already on, the first thing you do is fire up the boiler. Likewise, first thing in the morning, we all like to wake up to a nice toasty house (if you’re anything like me, it’s tricky getting out of bed otherwise!) so the heating’s set to come on early. If you work from home, or are retired, the chances are its on for the majority of the day.
More importantly, if you’re a business, it could be on for very long periods, ensuring your workforce are comfortable and likewise your customers.
Just when you thought it was safe to come out from under the duvet, news reaches us of yet more potential rises in gas prices. This, of course, is not welcome festive news for the thousands of companies who need to factor business energy usage into their bottom line. Well, here at Business Gas.com, we might not be able to get you an Xmas card in time; however, we will always do what we can to reduce the impact of such rises by scouring the market for the best energy deal for you and your business.
Here’s the latest problem: think back to the tail end of last winter, to March 2013, when we thought the worst of the weather was over. Well, rather like Australia’s confident batting display, it turned out the tail end could pack a mighty punch. I personally found myself in what was called a ‘once in a thousand year’ storm on the Western Isles of Scotland, witnessing collapsed power lines and stranded cattle. That extreme weather led to the shutdown of two main UK pipelines. And in an unfortunate game of economy dominos, that had the consequent effect of doubling gas prices.
Things have, of course, settled back down since then, but now we find the winter of 2013-2014 fast approaches. And the issue now is a lack of storage, leaving the UK vulnerable, especially if supply is disrupted by now macro-economically crucial countries such as Russia. Here in Britain we store our gas in huge tanks, but Germany has five times our capacity. Put simply, Germany has 70 days of gas reserves, should supply dry up. The UK has 13. If we experience another savage winter or sudden cold snap, and supplies again diminish and run low, the economic pressures of supply and demand would entail that the cost of gas would soar. (more…)