OPEC sees ‘a more balanced market’ – a higher demand for its crude oil in 2016

The Organization of Petroleum Exporting Countries (OPEC) released its Oil Monthly Report (OMR) for July, predicting economic growth would continue to drive oil demand, even as the group revised world economic growth down. OPEC forecasts global GDP to grow by 3.2% in 2015, down from  3.3% in its previous prediction.

In 2016, GDP growth is expected to reach 3.5%, with forecasts showing the OECD expanding by 2.1%, an increase of 0.1% from 2015. OPEC believes that China’s growth will slow to 6.5%, while India is forecast to grow even faster at 7.7%. Both Russia and Brazil are expected to move out of recession next year as well, reports OPEC. The United States is expected to grow 2.4% in 2015, and 2.6% in 2016.

OPEC July OMR Graph

The stronger economic growth will translate into healthier oil demand, according to OPEC. World oil demand in 2015 is expected to grow by 1.28 MMBOPD, up 0.1 MMBOPD from the June OMR. In 2016, OPEC expects global demand to grow by 1.34 MBOPD to 93.94 MMBOPD of demand. Most of this demand growth is expected to come from China, despite the downward revision to the country’s economic growth.

Non-OPEC supply growth has slowed substantially since last year, but the July OMR revised supply expectations from non-OPEC countries up from the beginning of July to average 0.86 MMBOPD from 0.68 MMBOPD. Non-OPEC supply growth is expected to slow even more in 2016, increasing by just 0.30 MMBOPD, according to OPEC.

Total U.S. liquids production is expected to grow by 0.33 MMBOPD in 2016, just one third of the 0.93 MMBOPD of production growth expected this year.

Based on the forecast released in the July OMR, OPEC believes that world oil demand will outpace projected non-OPEC supply and OPEC NGLs, resulting in higher demand for OPEC’s crude oil in 2016. OPEC expects demand for its own crude to increase to 30.10 MMBOPD, up 0.90 MMBOPD from 2015. “This would imply an improvement towards a more balanced market,” the OPEC report read.

Saudi Arabia continues to increase production

OPEC said that Saudi Arabia reported production of 10.56 MMBOPD last month, up 231,000 barrels from May, According to industry data, that would be a record high, reports Reuters. The Saudi’s continued push towards higher production is in line with analyst expectations.

Goldman Sachs and Citi Group both anticipate that OPEC’s largest producer will try to reach its maximum daily output by the end of this year.  “If you are Saudi Arabia and you’re looking at the new oil order we live in, you would go to full capacity,” Jeff Currie, head of commodities research at Goldman Sachs in New York said. The lower commodity price environment seen since prices plunged last year has turned un-pumped oil in to a depreciating commodity, according to Seth Kleinman, Citigroup’s head of energy strategy, meaning Saudi is interested in getting as much out of the ground as quickly as possible.

Important disclosures: The information provided herein is believed to be reliable; however, EnerCom, Inc. makes no representation or warranty as to its completeness or accuracy. EnerCom’s conclusions are based upon information gathered from sources deemed to be reliable. This note is not intended as an offer or solicitation for the purchase or sale of any security or financial instrument of any company mentioned in this note. This note was prepared for general circulation and does not provide investment recommendations specific to individual investors. All readers of the note must make their own investment decisions based upon their specific investment objectives and financial situation utilizing their own financial advisors as they deem necessary. Investors should consider a company’s entire financial and operational structure in making any investment decisions. Past performance of any company discussed in this note should not be taken as an indication or guarantee of future results. EnerCom is a multi-disciplined management consulting services firm that regularly intends to seek business, or currently may be undertaking business, with companies covered on Oil & Gas 360®, and thereby seeks to receive compensation from these companies for its services. In addition, EnerCom, or its principals or employees, may have an economic interest in any of these companies. As a result, readers of EnerCom’s Oil & Gas 360® should be aware that the firm may have a conflict of interest that could affect the objectivity of this note. EnerCom, or its principals or employees, may have an economic interest in any of the companies covered in this report or on Oil & Gas 360®. As a result, readers of EnerCom’s reports or Oil & Gas 360® should be aware that the firm may have a conflict of interest that could affect the objectivity of this report.


Legal Notice