International Oil Surplus Spurs Business

oil-surplusWorldwide oil production will not scale back output, as the price of oil continues to drop. OPEC, announced late last year that their production would continue on their current pace, coupling that with the current emergence of shale-oil in the Permian basin, and we have an oil surplus. With the price-per-barrel lingering around $50 of late, look for an uptick in mergers and acquisitions in the oil industry around the world.

Industry experts deduce their predictions from analysis and discussions with market decision makers and those in charge of major players in the oil world. Current cost and cash-flow pressures on companies, had led to evaluation of strategic movement into dealmaking. Late last year, announcements had begun with the Halliburton-Baker Hughes merger. This deal is set to be complete this coming summer. Also last year, a deal was made for   a Nigerian oil block and pipeline by Royal Dutch Shell to an association led by Taleveras group. Predictions are stating that in the next 6-12 months we may see the most M&A activity in sector.

Firms that are currently weathering the surplus storm, will look to take advantage of their continued cash-flow and leverage their position to acquire companies which seek a lifeboat. Firms that operate internationally will be on the prowl to enhance their portfolios while more local, national firms may be road blocked by their home-country’s agenda.

Keep in mind that with the state of the market sector, those who are in good financial standing have less cash on hand than usual. Any offer or strategic movement will be heavily thought over and carefully planned out. With decreased cash companies will not be letting a penny go to waste.

In all, analysts are stating that deal activity will benefit international and national oil health. This is an industry that has seen slow M&A activity compared to other sectors. New deals may spark a healthier market.
For more please visit GulfBusiness article and also visit: Araceli Roiz


Global Debt Rising

With every passing year, the World’s debt is slowly climbing. This increase in debt can be compared to a bubble waiting to burst. Although as a whole, debt is falling (in some countries), the amount of debt around the world is still historically high. The reason for the historically high amounts of debt is based on the glowing growth of the economy tied in with inflation falling, which causes interest and debt payments to rise. This so called ‘poison‘ combination causes households to simply not pay off debt debt outstanding chart BBC reports, “There has also been a fall in inflation rates in many countries. Inflation can help limit debt burdens. Household incomes, company revenues and government tax receipts all rise but debt payments are often fixed. Low inflation, especially if it is lower than borrowers expected when they took their loan, weakens that process and leaves debt burdens heavier than they would have been.”

A major factor in this crisis is that Asian countries, in particular China, which is one of the largest players in the world’s economy has an extraordinary high peak in debt in the recent years. “In the case of China, the report describes the rise in debt as “stellar”. Excluding financial companies it has increased by 72 percentage points to a level far higher than any other emerging economy.” According to a BBC article, Turkey, Thailand, and Argentina have marked high increases in debt.

As for the US and UK, have been doing their part in terms of lowering the debt. Even though the government debt has been rising in both countries, which will most likely continue to rise, the household debt problem in these countries have dropped significantly.UK, US debt breakdown chart This can be accredited to a stable economy which leads to households paying back loans at a lower interest rate. Even though the World debt is getting to a point which is unsafe, Mark Carey of the US Federal Reserve believes the US is doing OK, “he would have toned down a little the size of the disaster we are facing, and that the situation is not as bad as described. He said there is no obvious downtrend in economic growth and pointed out that a great deal of American debt has a variable interest rate. That would reduce the debt burden as inflation falls.”

We can only hope that trends begin to change because once that bubble bursts the world’s economic state could go haywire. For more on this issue, please visit BBC‘s article on the World Debt Issue.