Brent, the global oil benchmark, was last up 2.45% at $29.26 a
barrel. It fell to a fresh 12-year low overnight, as investors absorbed
the news that sanctions were lifted against Iran, which can again trade
oil on international markets. Brent crude, used as an international
benchmark,fell as low as $27.67a barrel, its lowest since 2003, before
recovering to trade at $28.86 and later to $29.65.
Oil has had a testing few days. World economic growth for 2015 has
been revised down to 3.0% from 3.1%, while the forecast for 2016 remains
unchanged at 3.4%. According to OPEC’s January energy report, the
growth risk is seen skewed to the downside as both emerging and some
OECD economies are facing several challenges. “OECD growth remains
unchanged at 2.0% and 2.1% for 2015 and 2016, respectively. Also, growth
in China remains at 6.8% and 6.4%, while India’s growth numbers remain
at 7.3% and 7.6%, respectively,” it noted.
The cartel says world oil demand is estimated to have
increased by 1.54 mb/d in 2015 to average 92.92 mb/d. “This represents a
minor 10 tb/d upward adjustment, mainly reflecting an uptick in oil
requirements in the OECD Europe and Other Asia in the 3Q15. In 2016, oil
demand growth is expected to be around 1.26 mb/d, marginally higher
than in the previous report, to average 94.17 mb/d. World Oil Supply
Non-OPEC oil supply growth in 2015 now stands at 1.23 mb/d, following an
upward revision of 0.23 mb/d”.
The increase has been due to better-than-expected growth in the US,
Canada, Russia and Norway. In 2016, non-OPEC oil supply is now projected
to contract by 0.66 mb/d, following a downward adjustment of 0.27 mb/d.
The revision has been due to stronger declines expected in the US and
Canada caused by the lower price environment. OPEC NGLs are seen growing
by 0.17 mb/d in 2016, following an increase of 0.15 mb/d last year. In
December, OPEC crude production decreased by 0.21 mb/d to average 32.18
mb/d, according to secondary sources.
For its part, the IEA says global oil supplies expanded by 2.6 mb/d
last year, following hefty gains of 2.4 mb/d in 2014. By last December,
however, growth had eased to 0.6 mb/d, with lower non-OPEC production
that pegged below year-earlier levels for the first time since September
2012.
Persistent oversupply, bloated inventories and a slew of negative
economic news pressured prices so that by mid-January crude oil touched
12-year lows.TheOMRoutlook for 2016 has demand growth moderating to
1.2mb/d.
OPEC crude output eased by 90 000 barrels per day (90 kb/d) in
December to a still-lofty 32.28 mb/d, including newly re-joined
Indonesia. Iran, now relieved of sanctions, insists it will boost output
by an immediate 500 kb/d. Our assessment is that around 300 kb/d of
additional crude could be flowing to world markets by the end of the
current quarter.
Global inventories rose by a notional 1bn barrels in 2014-2015, with
the fundamentals suggesting a further build of 285 mb over the course of
this year. Despite significant capacity expansions in 2016, this stock
build will put storage infrastructure under pressure and could see
floating storage become profitable.
Global refinery runs averaged 79.5 mb/d in the fourth quarter of 2015, down 0.3 mb/d from the estimate in last month’sOMR due
to lower-than-expected throughputs in non-OECD Asia except China and a
very high maintenance schedule in October. Global refinery margins
weakened in December as middle distillate cracks fell and overwhelmed
the resilience of gasoline and naphtha.