Global Oil Price Stable  despite the rising demand – IEA Report

By Amina Faki

Organization of the Petroleum Exporting Countries (OPEC) estimates world oil demand in 2018 to grow by 1.26 million barrels per day (mb/d) to total 97.65mb/d.

This is attributed to the continued growth in the world economy forecasted to grow at 3.40 percent, capacity additions and expansions in the petrochemical sector.

OPEC estimates  that Non-OPEC to prop up production by 1.14mb/d to an estimated average of 58.96mb/d.

Genghis Analysts project that, the increased non-OPEC supply will continue acting as a counter to the OPEC deal to lower production and aimed to elevate the global oil prices.  “The net effect will be global oil prices oscillating between USD 40-60 per barrel in the upcoming year.”

The International Energy Agency (IEA) report shows that global crude oil output rose by 720 million barrels in June across the world.

“Global oil supply rose by 585 kb/d in May to 96.69 mb/d as both OPEC and non-OPEC countries produced more. Output stood 1.25 mb/d above a year ago, the highest annual increase since February 2016. Gains were dominated by non-OPEC, particularly the US” noted the report.

This was driven by higher production even in those countries subject to an OPEC-led deal to cut production.

“Higher output from members bound by the production pact knocked compliance to 78 percent in June, the lowest rate during the first six months of the agreement,” the IEA said in the report.
For 2017 to date, the value of the OPEC Basket is $51/bbl compared to $44/bbl just before the output agreement was announced and OPEC has earned more revenue than in 4Q16 when it pumped at record levels. In fact, the average daily revenue of OPEC and Russia so far this year is higher than in both 2015 and 2016.

At the start of the year, OPEC and non-OPEC countries, including Russia, agreed to cut production in order to boost market prices. They have since extended the deal until March 2018, but there are increasingly doubts over the sustainability of the deal.

In Africa, Ghana, Eni started production at its Offshore Cape Three Points (OCTP) integrated oil and gas development on the Sankofa-Gye Nyame field in May. First output came two and a half years after the development plan, and three months ahead of schedule, according to the operator. The new project, along with gains from Tullow’s 80 kb/d Tweneboa-Enyera-Ntomme project that started producing last August is expected to increase Ghana’s total oil production by 47 kb/d to 140 kb/d in 2017 and 70 kb/d next year.

Other gains are expected to come from Congo, where Total recently fired up its Moho Nord development. The project, which started up in March, has a production capacity of 100 kboe/d. Total already completed the first phase of the expansion program at the Moho Bilondo license at the end of 2015– adding 40 kb/d through Moho Bilondo Phase 1bis. Eni, meanwhile, is ramping up output at its Nene Marine field. As such, Congo’s oil production is set to increase by 54 kb/d this year and 70 kb/d in 2018, to reach 360 kb/d.

Outright benchmark crude prices have been on the back foot since 23 May, reflecting lower expectations about the pace of a global market rebalancing, despite OPEC’s decision in late May to renew output cuts.

With finalized March data available for most non-OECD countries, 1Q17 global refinery throughput estimate is revised higher by 0.2 mb/d, to 80.3 mb/d. The annual growth rate, however, remained subdued.” Noted the IEA Report.