The Oil Market Outlook
28 Mar 2018
Investec Commodities and Dr. Bassam Fattouh, take a look at global oil demand, along with expected trends for 2018/2019
Oil Market Outlook
Oil demand growth main contributor to the market rebalancing
- 2016 oil demand registered a strong year seeing growth of 1.5 million barrels per day
- 2017 oil demand increased by a further 1.7 million barrels per day
- 2018 expected to register another strong number above 1.5 million barrels per day
- Global oil demand is estimated to be 99.3 million barrels per day in 2018
OPEC sticking to the deal
- OPEC and non-OPEC oil giant Russia have agreed to extend oil output cuts until the end of 2018
- The deal to cut oil output by 1.8 million barrels a day was adopted in January 2017 by the 14-member OPEC, Russia and nine other global producers
- OPEC compliance remains high
- Saudi Arabia has been leading the pack focusing not only on production cuts but also exports which fell sharply from their highs in November 2016
- We see Saudi Arabia sticking to the deal even if risk over-tightening the market
- OPEC crude oil production edged lower in February to 32.1 million barrels per day
US Shale: Putting a cap on the oil price
- Total US oil production is estimated at 10 million barrels per day (including Shale)
- Total US Shale oil production is estimated 4.67 million barrels per day
- US Shale will put a cap on the oil price in the near term
- Shale oil production reverted back to growth in April 2017
- Production reached year on year growth of 1.18 million barrels per day in December 2017
- Shale oil production is expected to grow 1.2 million barrels per day in 2018
IMO 2020 and shockwaves
- The International Maritime Organization has set a global limit for sulphur in fuel oil used on board ships of 0.50% from 01 January 2020
- This will significantly reduce the amount of sulphur oxide emanating from ships and should have major health and environmental benefits for the world
- Fuel oil demand is around 7.5 million barrels per day in 2017 of which around 3.5 million barrels per day is HSFO used mainly in the shipping industry
- Shipping industry face three options
- Install scrubbers to mitigate the use of higher-sulphur fuel
- LNG bunkering
- Switch to marine diesel
- Depending on assumptions about scrubber uptake, the boost to marine diesel is expected to be around 2.1 million barrels per day
Source: EIA, IEA, IMO, Energy Aspects