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FT wrote, oil markets will remain awash with crude well into 2017, Opec warned on Monday, as the resilience of the US shale industry and new streams of oil production threaten to keep pressure on prices.
The producer cartel revised higher for this year and next oil supply forecasts from non-member countries, implying that demand for its crude will remain far lower than current near record output of more than 33m barrels a day.
The larger than expected surplus threatens to derail hopes that supply and demand will come into balance by next year, putting a damper on prices that remain less than half mid-2014 levels.
Opec is due to meet other large producers later this month to discuss possible output curbs, with talks likely to receive a jolt of urgency following the latest forecasts.
Brent, the international crude benchmark, fell 2 per cent to $47 a barrel shortly after the publication of the cartel's monthly oil report.
Opec kingpin Saudi Arabia and Russia, the largest exporter outside the group, agreed last week to work together to stabilise the market but there are still big doubts that a deal to reduce or freeze production is attainable.
Opec countries have stepped up production to a near record 33.2m b/d, according to secondary sources. While production is down slightly from August, it is more than 1m b/d above a year ago.
The so-called "call on Opec" — or the amount of crude the market needs from the group — is at 31.67m b/d for 2016 and 32.48m b/d for 2017.
Output outside of the cartel is expected to expand next year, potentially leaving the market with a more than 750,000 b/d of surplus crude if Opec's production remains at today's heightened levels — 2017 non-Opec production was revised up by 350,000 b/d from last month to an average of 56.52m, an increase on this year.
Opec said its revised forecasts were mainly due to the resilience of the US shale oil output in the face of lower prices and the long-delayed Kashagan field in Kazakhstan, which is expected to come on stream later this year.
Kashagan, the world's most expensive oil project, has been dogged by technical challenges, delays and cost overruns. It has cost the consortium — which includes Royal Dutch Shell, ExxonMobil, Total, Eni and CNPC — more than $50bn to develop.
The project, which has some 10bn barrels of recoverable reserves, was halted in 2013 to make pipeline repairs. It is scheduled to relaunch in October, with initial production of 75,000 b/d being targeted by November, according to officials in Kazakhstan.
Analysts say new streams of production from the North Sea, Russia, Brazil and the US Gulf of Mexico may also delay any rebalancing of supply and demand, as well as Opec's own production.
Some producer countries such as Venezuela and Algeria have pushed for a global deal to curb further increases in crude production and prevent any more drops in the oil price.
Saudi energy minister Khalid Al Falih said last week there is no hurry to limit output but there is a possibility to do so in the future.
Iran, meanwhile, has said it supports measures to stabilise the market but has not committed to any output restraint until reaching 4m b/d — a level at which it was pumping before the imposition of western sanctions against its oil industry.
Opec data showed Iranian output has held near 3.6m b/d for several months.
Analysts say that, even if these Opec exporters, together with non-Opec peers such as Russia, agree on freezing output around current levels later this month, it would do little to raise prices as many are pumping flat out.
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IMF - Output grew by 3.8 percent in 2017, underpinned by a resilient non-hydrocarbon sector, with robust implementation of GCC-funded projects as well as strong activity in the financial, hospitality, and education sectors. The banking system remains stable with large capital buffers. Growth is projected to decelerate over the medium term.
IMF - Higher oil prices and short-term portfolio inflows have provided relief from external and fiscal pressures but the recovery remains challenging. Inflation declined to its lowest level in more than two years. Real GDP expanded by 2 percent in the first quarter of 2018 compared to the first quarter of last year. However, activity in the non-oil non-agricultural sector remains weak as lower purchasing power weighs on consumer demand and as credit risk continues to limit bank lending.