OPEC production rises 1.2% to 32.6mn bpd in June
▶Global oil supply increased by 660,000 bpd to 96.59mn bpd in June 2017
▶OPEC production increased by 1.2 per cent month-onmonth during June to 32.6mn bpd
▶Prod▶ction of non-OPEC countries who agreed on cutting the output rose by 0.5 per cent
▶O▶tp▶t cut compliance dropped to 92.2 per cent in June, second lowest after 88.4 per cent in January
The OPEC production increased by 1.2 per cent on monthly basis during June to 32.6mn barrels per day (bpd) compared to 32.2mn bpd in May. The rise in OPEC production was largely because of increase in oil production by Libya, Nigeria, Iraq and Angola. Amongst the Organisation of Opetroleum Exporting Countries, the countries which agreed on output cut witnessed a production rise of 0.5 per cent to 26mn bpd in June compared to 25.9mn bpd in the previous month. Venezuela and Gabon were the only countries within the bloc which witnessed a drop in output while all other twelve members witnessed a production rise.
The share of OPEC crude oil in total global production slightly increased by 0.2 percentage point to 33.8 per cent in June compared with the pre- vious month at 33.6 per cent.
Globally, oil supply increased by 660,000 bpd to average 96.59mn bpd in June 2017, compared with the previous month.
The increase of non-OPEC supply (including OPEC NGLs) by 270,000 bpd mainly driven by Canada production returning from the wildfire as well as OPEC crude oil production by 370,000 bpd in June led to an increase in global oil output.
Global oil demand
Global oil demand growth in 2017 is expected to be around 1.27mn bpd, broadly unchanged from previous month, to average 96.4mn bpd. The latest data shows demand in India and China have remained robust, reflecting healthy manufacturing and road construction activities in the former, and rising demand in the transportation and industrial sectors in the latter.
For 2018, the world oil demand is anticipated to rise by 1.26mn bpd, slightly below the current year’s growth, to average 97.6mn bpd.
US oil rig count
According to Baker Hughes’ latest survey, for the week ending July 7, total US rig count increased by 12 rigs week-onweek to 952 units. This includes additional five gas rigs, taking the total number to 189 units, and seven oil rigs, taking the total to 763 units. This means that the US oil rig count has risen by 512 year-on-year.
Total US oil rig count in June was at 750 rigs, an increase of 32 rigs on monthly basis, and up by 412 rigs on year-on-year basis. In terms of drilled but uncompleted (DUCs) wells, 176 wells were added to the inventory in May, the sixth straight monthly increase. The US total now stands at 5,946 DUCs, up from a post-downturn low of 4,913 in November 2016. Operators started building up an inventory of DUCs in 2014 as oil prices collapsed.
Given high level of inventory in the US, increasing rig count, revival of production in war torn areas like Libya and Iraq, technological advancements and cost optimisation in the field of clean energy and advancements in the shale oil extraction procedures, we believe oil prices are expected to remain low in the short to medium term.