OPEC released its Monthly Oil Market Report on August 10, 2016, I have pulled some items of interest from the report.
World Oil Demand
World oil demand growth in 2016 is expected to average 1.22 mb/d, some 30 tb/d higher than last month. For 2017, world oil demand is forecast to grow by 1.15 mb/d, unchanged from the previous report. While the OECD will contribute positively to oil demand growth adding some 0.10 mb/d, the bulk of the growth in 2017 will originate from the non-OECD with 1.05 mb/d.
World Oil Supply
Non-OPEC oil supply is expected to contract by 0.79 mb/d in 2016, following an upward revision of 90 tb/d since the previous report, driven by higher-than-expected output in 2Q16 in the US and UK. In 2017, non-OPEC supply is expected to decline by 0.15 mb/d, following a downward revision of 40 tb/d. OPEC NGL production is forecast to grow by 0.16 mb/d and 0.15 mb/d in 2016 and 2017, respectively. In July, OPEC production increased by 46 tb/d to average 33.11 mb/d, according to secondary sources.
Balance of Supply and Demand
Demand for OPEC crude in 2016 is estimated at 31.9 mb/d, unchanged from last report and 1.9 mb/d higher than in the previous year. In 2017, demand for OPEC crude is forecast at 33.0 mb/d, in line with the previous report and 1.2 mb/d higher than in 2016.
Forecast for 2016
Demand for OPEC crude for 2016 remains unchanged from the previous month to stand at 31.9 mb/d, representing an increase of 1.9 mb/d from last year’s level. Within the quarters, 2Q16 and 4Q16 remained unchanged, while 1Q16 was revised up by 0.1 mb/d. In contrast, 3Q16 was revised down by 0.1 mb/d. 1Q16 and 2Q16 rose by 1.0 mb/d and 2.3 mb/d, respectively, versus the same quarters last year; while 3Q16 and 4Q16 are estimated to show growth of 2.1 mb/d and 2.0 mb/d, respectively.
Forecast for 2017
Demand for OPEC crude for 2017 remained unchanged from the previous report and is projected to increase by 1.2 mb/d to average 33.0 mb/d. Within the quarters, both the 2Q17 and 3Q17 were revised up by 0.1 mb/d, while 4Q17 was revised down by 0.1 mb/d and 1Q17 remained unchanged from the previous report. 1Q17 and 2Q17 are expected to increase by 1.8 mb/d and 0.8 mb/d, respectively, while 3Q17 and 4Q17 are projected to increase by 1.3 mb/d and 0.7 mb/d, respectively, versus the same quarters this year.
If the non-OPEC + OPEC NGL and NCO supply estimate and World demand estimates are accurate, it seems unlikely that OPEC will be able to meet the required crude level in 3Q17 of 34.43 Mb/d. If that assessment is correct and the World economy continues to grow at around 3% in 2017, my expectation is that oil prices will average $85/b or more during the month of October 2017 and perhaps even by September.
Ron Patterson kindly shared monthly OPEC data that he has compiled.
OPEC crude output increased by 49 kb/d in July to 32,875 kb/d.
Most of the increase in OPEC output has come from Iraq, Kuwait, Saudi Arabia, and UAE, though production from Iran has increased as well. These four countries as a group increased output by 125 kb/d in July to 20,523 kb/d.
Iranian output has increased by 742 kb/d since January to 3629 kb/d, but in July output increased by only 12 kb/d.
The other OPEC nations have seen mostly decreasing output (Gabon data is not included) since 2005, but since 2015 output has been relatively flat. In July, output in these 8 nations fell by 75 kb/d to 12,352 kb/d.
My expectation is that output from OPEC will be relatively flat for the next 12 months, when oil prices rise, further increases from OPEC might be possible, but it is not likely to be much (1000 kb/d or less) unless Libya, Venezuela, and Nigeria solve their political problems. I doubt those political problems will be solved in the short term (next 3 years). The World will either struggle to remain near current output or will decline slightly (1% or less) until 2018, after that oil prices will rise and output will remain on plateau or rise to near the previous peak, after 2022 (possibly sooner) there will be permanent decline in oil output even if oil prices are high($150/b in 2016$.)