KAMCO Oil Market Report
while Brent crude increased by 19.1 percent to reach an average price of $53.29/b during December-16. Crude price was further supported by weakness in the greenback which declined to the lowest level in five weeks against a basket of currencies after USD-related comments were made by the new incoming US president. Further support on the supply side came from China which is said to have reduced oil production by almost 7 percent during 2016, the first decline since 2009 and the biggest one since 1990.
Moreover, production is forecasted to decline at the same pace during 2017 despite the rise in oil price as the country’s largest oil fields are fast aging in addition to higher production cost. Furthermore, China’s National Development and Reform Commission said in a report that the country’s oil output is expected to decline to an average of around 200 mb/d by 2020 as compared to an average of 215 mb/d during 2011-2015. Production in the overall Asia Pacific region is also expected to fall with China accounting for the bulk of this decline. This augurs well for OPEC players as it is expected to increase China’s dependence on oil imports, which reportedly increased by 9 percent m-o-m in December-16 to 8.57 mb/d.
The average monthly OPEC crude price during December-16 increased by a strong 20 percent to $51.67/b, the highest monthly average since July-15. The rise in Kuwait average crude price was even stronger at 21.5 percent and stood at $51.13/b while Brent crude weather. Demand numbers for the OECD Asia Pacific region was raised by a total 100 tb/d for Q2-16 and Q3-16 on the back of better than expected demand growth in South Korea that extended till the last quarter. The OECD Europe region witnessed higher demand for transportation fuels and naphtha specifically Netherlands, Poland, Turkey and the UK. On the other hand, demand from OECD Americas was slashed by 20 tb/d for Q1-16 and 30 tb/d for Q4-16 due to warmer-thanexpected weather conditions across the continent that affected demand for heating fuel and thereby partly offsetting the demand increase in other regions.
For the non-OECD countries, demand growth saw an upward adjustment for Other Asia (+20 tb/d) and China (+10 tb/d), while demand expectations for Latin America (-50 tb/d in 4Q-16) and the Middle East (-20 tb/d in Q3-16 and -80 tb/d in Q4-16) region was lowered. The revision for Middle East region reflected substitution effect in Saudi Arabia as well as slower-than-expected regional economic growth.
Oil demand growth for 2017 was also upgraded at an equal pace as in 2016 and is now expected to grow by 1.16 mb/d to reach 95.6 mb/d for the year. The revision was primarily on the back of higher expected demand growth in OECD Europe (+50 tb/d in Q1-17 and +30 tb/d in Q2-17) during the first quarter of 2017 owing to cold weather conditions across the continent as well as improvement in transportation fuel demand. The expected