- Brent rallied to c. $36/bbl on 29th February from a low of $27.76/bbl in January, buoyed by negotiations between Russia and OPEC countries
- Prices remain more volatile than in August and September 2015 on significant uncertainty of price direction going forward
- Our average 2016 Brent price forecast has been revised lower to $36.49/bbl (-$2.70 on last forecast) incorporating January’s lows, but recovers to over $40/bbl by Q4 2016
- Strong global oil demand growth will outpace supply growth, but at a slower pace than in 2015, lessening but not eradicating global oversupply
- The IEA sees global oil supply and demand in balance by 1H2017, with prices increasing thereafter
- This leads the agency to predict a rebound in US LTO production by 2018, after falling c. 600,000 b/d in 2016, below our estimate of 781,000 b/d
- Continued capex cuts by oil majors suggest that non-OPEC production will decline faster short term, as new capacity is deferred and old fields are shut-in
- Despite talks of a freeze, OPEC produced at near record levels in January
by Alexander Wilk // 1 March, 2016
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