OPEC raises 2016 oil de­mand es­ti­mate, fore­casts more bal­anced mar­ket

Financial Mirror (Cyprus) - - FRONT PAGE -

In its Monthly Oil Mar­ket Re­port for De­cem­ber, re­leased Mon­day morn­ing, the Or­gan­i­sa­tion of the Pe­tro­leum Ex­port­ing Coun­tries (OPEC) noted that the car­tel’s price for its ref­er­ence bas­ket fell 17% in De­cem­ber and that for 2015 the value of a ref­er­ence bar­rel fell nearly 50%. The main con­trib­u­tor to the de­cline was “per­sis­tent over­sup­ply,” but the slow­ing of China’s eco­nomic growth and the in­creas­ing strength of the U.S. dol­lar also played a role.

On a yearly av­er­age ba­sis, the price of both Brent and WTI crude fell dou­ble dig­its for a se­cond straight year, with ICE Brent clos­ing 2015 at an av­er­age of $53.64 a barre com­pared with $99.51 at the end of 2014. Nymex WTI plunged by $44.20 a bar­rel to set­tle at $48.80, down from $93 in 2014. The Brent-WTI spread nar­rowed sig­nif­i­cantly again in De­cem­ber to av­er­age $1.58 a bar­rel, as WTI gained some sup­port from a mo­men­tary de­cline in in­ven­to­ries, re­duced drilling, and the end of a ban on most U.S. crude ex­ports.

Prices have fallen even fur­ther in the first half of Jan­uary. WTI closed at $38.17 on De­cem­ber 31 and fell to $29.35 a bar­rel on Fri­day, a drop of 23%. Brent closed at $37.67 on the last day of 2015 and set­tled at $28.94 last Fri­day, also a drop of 23%. But no­tice that Brent now trades below WTI.

OPEC pumped 32.18 mln bar­rels of oil a day in De­cem­ber ac­cord­ing to what the car­tel refers to as sec­ondary sources, down 211,000 bar­rels a day month-over­month. Non-OPEC mem­ber Oman has of­fered to re­duce pro­duc­tion by 5% to 10% if it can per­suade other pro­duc­ers to do the same thing. OPEC mem­bers that have been hit hard­est by col­laps­ing oil prices may want to fol­low along, but are un­likely to do so. Not with Iran about to be­gin ex­port­ing crude again af­ter sanc­tions have been lifted. The car­tel notes in its re­port that world de­mand for oil in 2015 av­er­aged 92.92 mln bar­rels a day while sup­ply ex­ceeded de­mand by 1.94 mln bar­rels a day. OPEC fore­casts 2016 de­mand of 94.17 mln bar­rels a day, an in­crease of about 1.3%. Non-OPEC sup­ply is fore­cast at 62.53 mln bar­rels a day, leav­ing the so-called ‘de­mand on OPEC’ at 31.65 mln bar­rels a day.

Com­bined OPEC and non-OPEC sup­ply ex­ceeds de­mand by about half a mil­lion bar­rels a day. That’s closer to bal­ance, but the im­pact on pric­ing could be neg­li­gi­ble.

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