Oil Market Snapshot – December 2016

  • Brent rallied strongly to $55.68/bbl (+12%/$6.71/bbl m-o-m) following OPEC and non-OPEC agreements in November and December
  • Our average Brent price reference case forecast for 2016 is $42.95/bbl and a range of $55-66/bbl for 2017
  • India outpaced China’s oil demand growth; both countries continue to drive global demand growth, which holds firm at 1.35 and 1.37 million b/d for 2016/17
  • Permian basin most responsive to oil price recovery but unable to offset declines from Bakken and Eagle Ford; our forecast for US crude production remains a decline of 0.37 million b/d in 2017. The recovery in US onshore production from 2018 depends on  capital availability
  • Russia’s planned projects will add 1.4 million b/d peak capacity and likely continue to grow production until 2020; few new projects planned to hold production steady thereafter
  • Further capex cuts elsewhere are expected in 2017, as a result offshore industry continues to suffer. Lack of investments outside OPEC still poses a risk to filling the long-term supply gap
  • Albeit a production cut agreement is in place, we still expect to see a net growth of 340,000 b/d from OPEC in 2017 and accelerated growth in 2018. We see non-OPEC production flat in 2017
  • Continuing strong demand growth will rebalance the market by mid-2017, in our view

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