- Brent rallied to $63.98 on 29th April on signs that US LTO production is slowing and the OECD demand is recovering more quickly
- We forecast a lower Brent average for 2015 (-$1.90 compared to March), while 2016 is also cut on continued OPEC production this year
- We see global demand growth of 1.07 million b/d in 2015 (+100,000 b/d on previous forecast) and 1.22 million b/d in 2016 (-30,000 b/d previously)
- In March, Chinese officials announced a 14% cut in crude production for 2015 but Chinese NOCs expect only 1.37%
- Chinese strategic purchases have shored up last year’s demand; we expect this to continue next year as coverage expands from 30-40 to 90 days
- We expect North Dakota LTO production to average 1.19 million b/d in 2015, (+110,000 b/d y-o-y), but to fall back to 2014 levels (c. 1.09 million b/d) next year
- Overall non-OPEC production will see a 930,000 b/d gain in 2015, followed by a much lower gain of 60,000 b/d in 2016 as US LTO falls back
- We believe OPEC production will grow 440,000 b/d this year and 390,000 b/d in 2016 (not considering Iran)
- Lifting of Iranian sanctions could add 132,000 b/d and 348,000 b/d in 2015 and 2016 respectively, adding downward pressure on 2016 prices
- Shell’s planned BG takeover could herald a new era of industry consolidation; cost reduction remains viable alternative to grow production
by Graham Walker // 30 April, 2015
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