There is evidence to suggest the global oil market is gradually adjusting to overcapacity, which has driven down oil prices and hampered Arab Gulf steel-consuming construction investment, but challenges remain. This is according to Ahmed Mohamed Al Kaabi, United Arab Emirates assistant undersecretary for petroleum gas and mineral resources, and UAE’s OPEC Governor.

Between June 2014 and July 2016 crude oil prices fell 80%, the largest drop for three decades. “This current cycle is supply driven,” Al Kaabi said at the worldsteel conference in Dubai attended by Kallanish on Monday. “It is mainly coming from the high-cost non-OPEC producers.” Global oil exploration and production fell -26% on-year in 2015, and is seen declining a further -22% in 2016. These combined equate to a $300 billion drop in investment.

“There is evidence suggesting the market is gradually adjusting itself,” Al Kaabi said. Non-OPEC oil supply is forecast to decline by 600,000 barrels/day in 2016, while demand growth is seen at 1.4 million barrels/day.

Challenges remain, however, such as uncertain global energy demand, financial market movements, geopolitics, and technological developments in oil production, Al Kaabi concluded.

His colleague Abdullah Al Saleh, UAE economy ministry undersecretary, said that UAE’s steel demand is surging thanks to growing construction and infrastructure projects. However, “…we cannot afford to be complacent given today’s unpredictable financial movements,” he told delegates.

The UAE government aims to increase the manufacturing sector’s contribution to gdp by 20% to 80% in 2021, Al Saleh observed. In 2015 iron and steel exports comprised 5% of UAE’s non-oil export value, at $2.5 billion.