Oil Cover

Oil Market Snapshot – December 2014

  • Brent hit a five year low on 18 December at $58.81/bbl, a 49% decline from $115.19/bbl in June 2014
  • We have revised our forecasts for yearly average Brent downwards to $99.33/bbl (from $101.13/bbl) and $67.84/bbl (from $81.78/bbl) for 2014 and 2015 respectively; but our preliminary price projection for 2016 is at $85.18/bbl
  • We have also cut our world oil demand growth forecast by 0.14 million b/d to 0.97 million b/d for 2015 due to a sluggish global economy
  • But China continues to build its strategic petroleum reserve (SPR) and low oil price windfall could partially translate into higher consumer demand, too
  • Despite declining oil prices, sanctioned field development projects will bring additional capacity in 2015 – e.g. roughly 3.45 million b/d gross growth from offshore in 2015 – but net growth only moderate
  • We expect widespread cuts in E&P investments, with US LTO being the most exposed while oil sands and ultra-deepwater likely to continue due to their longer investment cycles
  • US LTO rig count has fallen by 39 units within two weeks in a swift reaction to price fall, further reductions are likely

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