The oil market continues to experience fluctuating fortunes at present, after a challenging year that has seen the Organisation of Petroleum Exporting Countries (OPEC) attempt to cap supply and restore value to the marketplace.
While these efforts have achieved some success as prices increased noticeably last week (to $44.68 a barrel), analysts have been quick to suggest that oversupply remains a significant issue that will continue to place a strain on prices over time.
How Will the Dodsal Group’s New Project Impact on the Price of Oil?
Oversupply is not the only factor impacting on the price of oil and the financial marketplace as a whole, as the sector remains vulnerable to numerous developments in the private sector.
Most recently, the Dubai-based Dodsal Group has announced that it has been awarded a contract Algeria’s state energy producer Sonatrach. While the deal is relatively complex, it will essentially see Dodsal execute procuring, construction and engineering on a large-scale gas and oil separation plant. The project, which is set to be completed by the end of 2020, is one of the biggest of its type in recent times and has a cumulative value of $1 billion USD.
In the longer-term, this will increase the global supply of oil further, as the plant will produce at capacity of 66,000 barrels per day. So while it will further strengthen the Dodsal Group’s long-term relationship with Sonatrach and reinforce the brands’ presence in Algeria, it could well place further pressure on price points and sustain a marketplace where the supply of oil continues to grow at a disproportionate rate to demand.
How Will This Impact on Other Financial Markets?
A deal of this magnitude is also likely to have a short-term impact too, although this is most likely to felt within alternative markets. Stocks are likely to soar, for example, including those associated with the Dodsal Group and Sonatrach (and other brands that are active in the gas, energy and oil sectors).
In terms of currency and forex traders, news of the deal has also fortified the performance of the Dirham against both the U.S. Dollar (USD) and the Euro (EUR). This continued an ongoing trend in some respects, as the Dirham has also performed robustly against the ailing pound (GBP) ever since the Brexit vote of June last year.
For traders with a short-term outlook, this may offer the ideal opportunity to invest in the Dirham before its value peaks, particularly with the USD expected to weaken further during the remainder of the financial quarter.