Oil prices are expected to remain below $60 a barrel through 2017: Report

MUMBAI: A Cushman &

Wakefield

report on oil released on Wednesday said oil prices are expected to remain below $60 a barrel through 2017 and below $70 through 2020.

The research report titled, “Oil: the Commodity We Love to Hate,” assesses the impact of lower oil prices on each of the world’s major energy cities and provides insights into office sector fundamentals going forward.

"The impact of a protracted low oil price scenario is mixed: energy-producing regions struggle while consumers and non-energy producing markets benefit," it said.

“While the positives from lower oil prices outweigh the negatives in terms of impact on global economic growth, the effects on the office market are more of a mixed bag,” said Kevin Thorpe, Cushman & Wakefield’s Global Chief Economist. “Most energy-producing office markets have seen economic slowing and lower occupancy levels, while stronger consumer spending has boosted occupancy virtually everywhere else. For occupiers, the prolonged oil price rebalancing will create efficient and cost saving opportunities in some markets, but rental pressure in others.”

Overall, the plunge in oil prices has been a net negative on the world’s largest energy-producing markets. As a group, these markets are experiencing slower economic growth, slower job creation, and weaker office sector fundamentals. However, while office markets such as Moscow, Aberdeen, Calgary, and Houston have faced significant headwinds due to the oil shock, others are holding up well and even thriving.

Asia Pacific Region
“Generally, markets in the Asia Pacific region have benefited from the weakness in oil prices,” said

David Jones

, international director of Global Occupier Services. “The filtering down of lower oil prices to lower food and fuel prices has subdued inflationary pressures, boosted consumer spending, and given Asian central banks greater scope for monetary easing.”

The footprint of oil and gas companies in APAC’s office sector is relatively small – estimated at less than 10 percent of total occupancy. As such, the impact of the slump in oil prices on office space has been relatively muted in cities like Singapore and

Malaysia

, where the proportion of space that energy companies occupy is not large.

In Perth, the Australian city most influenced by commodities (inclusive of oil and gas), the office vacancy rate has increased to 17.2 percent since the correction from 15.2 percent during the oil price boom. While the rise is not all oil-related, oil has played a significant role, said the report.


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