Oil prices will not rebound to US$100 a barrel any time soon as US shale takes over as swing producer, the International Energy Agency (IEA) said yesterday in its medium-term oil market report covering the next five years.
Last summer oil prices peaked at $115 a barrel and moved under $50 last month. Yesterday Brent was trading just above $58.
The West's energy watchdog said that oil would remain around $55 this year and inch up to $73 a barrel in 2020.
Maria van der Hoeven, the executive director at the IEA, said that shale oil had changed the market, and Opec's refusal to cut production levels was a turning point. "[Opec] may have effectively turned [shale oil] into the new swing producer, but [Opec] will not drive it out of the market. Light tight oil might in fact come out stronger."
The ratings agency Standard & Poor’s also released a statement yesterday echoing the IEA, revising its oil price assumptions down for the next three years. The ratings agency believes that the price of oil will teeter around $55 a barrel this year, down from its October review of $105 a barrel.
The IEA said that global supply capacity will expand by 5.2 million barrels per day by 2020, but the toll on production will vary by country. The US is still expected to remain the leader for supply growth for the remainder of the decade, while Russia will take the brunt of the blows from market volatility.
Opec’s share of global supply is expected to increase from its recent lows, but the IEA said it would not recover to the levels reached before the US shale boom.
Opec said on Monday that demand for its oil would average 29.21 million bpd this year, an increase of 430,000 bpd from its previous forecast.
The UK-based research consultancy Energy Aspects believes that the IEA is not taking into account the effects of large companies reducing spending in places.
“The IEA is underestimating the impact on non-Opec production, like the US, where huge capital expenditure cutbacks are being implemented,” said Amrita Sen, the chief oil analyst at Energy Aspects. “The loss in supplies can be huge and prices are likely to rally higher and earlier than 2020.”
The steepest oil rout in five years has forced oil companies to slash capital expenditures, signalling a slower growth in supply. ConocoPhillips, the third-largest US energy producer, cut its capital budget for this year by 20 per cent — the largest by an American company.
Dubai-based Al Masah Capital said in the second half of the year a new supply picture will appear as a result of structural changes like the shutting down of US rigs. “We will then possibly see the new trading range and a possible bottom to the oil price,” said Akber Naqvi, the executive director at Al Masah. “Up until that point, volatility will be the only winner.”
The latest data from the oilfield services company Baker Hughes showed that the total number of US oil rigs in use has dropped to its lowest levels since the end of 2011.
Market volatility, particularly over the last quarter, resulted in onshore drilling rig activity in the US declining by 16 per cent. The US energy information administration predicts that number to drop further to 24 per cent by the end of October.
“Bottom line is the oil market is going through a significant, seismic change where the old set-up of suppliers and consumers is being turned upside-down. And that in itself needs time to play out,” said Mr Naqvi.
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Ten tax points to be aware of in 2026
1. Domestic VAT refund amendments: request your refund within five years
If a business does not apply for the refund on time, they lose their credit.
2. E-invoicing in the UAE
Businesses should continue preparing for the implementation of e-invoicing in the UAE, with 2026 a preparation and transition period ahead of phased mandatory adoption.
3. More tax audits
Tax authorities are increasingly using data already available across multiple filings to identify audit risks.
4. More beneficial VAT and excise tax penalty regime
Tax disputes are expected to become more frequent and more structured, with clearer administrative objection and appeal processes. The UAE has adopted a new penalty regime for VAT and excise disputes, which now mirrors the penalty regime for corporate tax.
5. Greater emphasis on statutory audit
There is a greater need for the accuracy of financial statements. The International Financial Reporting Standards standards need to be strictly adhered to and, as a result, the quality of the audits will need to increase.
6. Further transfer pricing enforcement
Transfer pricing enforcement, which refers to the practice of establishing prices for internal transactions between related entities, is expected to broaden in scope. The UAE will shortly open the possibility to negotiate advance pricing agreements, or essentially rulings for transfer pricing purposes.
7. Limited time periods for audits
Recent amendments also introduce a default five-year limitation period for tax audits and assessments, subject to specific statutory exceptions. While the standard audit and assessment period is five years, this may be extended to up to 15 years in cases involving fraud or tax evasion.
8. Pillar 2 implementation
Many multinational groups will begin to feel the practical effect of the Domestic Minimum Top-Up Tax (DMTT), the UAE's implementation of the OECD’s global minimum tax under Pillar 2. While the rules apply for financial years starting on or after January 1, 2025, it is 2026 that marks the transition to an operational phase.
9. Reduced compliance obligations for imported goods and services
Businesses that apply the reverse-charge mechanism for VAT purposes in the UAE may benefit from reduced compliance obligations.
10. Substance and CbC reporting focus
Tax authorities are expected to continue strengthening the enforcement of economic substance and Country-by-Country (CbC) reporting frameworks. In the UAE, these regimes are increasingly being used as risk-assessment tools, providing tax authorities with a comprehensive view of multinational groups’ global footprints and enabling them to assess whether profits are aligned with real economic activity.
Contributed by Thomas Vanhee and Hend Rashwan, Aurifer
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%3Cp%3E%3Cstrong%3EName%3A%3C%2Fstrong%3E%20Haltia.ai%0D%3Cbr%3E%3Cstrong%3EStarted%3A%3C%2Fstrong%3E%202023%0D%3Cbr%3E%3Cstrong%3ECo-founders%3A%3C%2Fstrong%3E%20Arto%20Bendiken%20and%20Talal%20Thabet%0D%3Cbr%3E%3Cstrong%3EBased%3A%3C%2Fstrong%3E%20Dubai%2C%20UAE%0D%3Cbr%3E%3Cstrong%3EIndustry%3A%3C%2Fstrong%3E%20AI%0D%3Cbr%3E%3Cstrong%3ENumber%20of%20employees%3A%3C%2Fstrong%3E%2041%0D%3Cbr%3E%3Cstrong%3EFunding%3A%3C%2Fstrong%3E%20About%20%241.7%20million%0D%3Cbr%3E%3Cstrong%3EInvestors%3A%3C%2Fstrong%3E%20Self%2C%20family%20and%20friends%26nbsp%3B%3C%2Fp%3E%0A
Who was Alfred Nobel?
The Nobel Prize was created by wealthy Swedish chemist and entrepreneur Alfred Nobel.
- In his will he dictated that the bulk of his estate should be used to fund "prizes to those who, during the preceding year, have conferred the greatest benefit to humankind".
- Nobel is best known as the inventor of dynamite, but also wrote poetry and drama and could speak Russian, French, English and German by the age of 17. The five original prize categories reflect the interests closest to his heart.
- Nobel died in 1896 but it took until 1901, following a legal battle over his will, before the first prizes were awarded.
