OMS-January-2017

Oil Market Snapshot – January 2017

  • Brent has held at c. $55/bbl, off slightly from its year end value of $56.71/bbl on fears of a US production recovery and high inventories
  • We forecast average Brent of $53.22/bbl in 2017, rising to $57.77/bbl in 2018
  • Global oil demand averaged 1.43 million b/d in 2016 (-270,000 b/d y-o-y). We see this rising to 1.56 million b/d in 2017 as US demand for diesel recovers on, amongst other things, greater tight oil activity
  • We see OPEC’s compliance to the production cut deal at 72% in January, despite December output reaching 33.1 million b/d
  • The major test for OPEC is still to come in the summer season, when members will have to hold the line in the face of higher prices; a cuts extension may be needed
  • A positive response to Mexico’s “Ronda Una” block auction suggests Big Oil still sees potential in deep water
  • Barclays sees upstream capex rising 20% y-o-y in 2017, though still 40% lower than 2014’s levels

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