Due mainly to lower supply from Nigeria, Algeria and Iraq, the OPEC crude output in the month of October dropped by 80,000 barrel per day, the Oil Market Report for November has revealed.
This came to light as the World Energy Outlook 2017 has projected that the global needs for energy would rise by 30 per cent between now and 2040. The rise, the outlook pointed out, would be equivalent of adding another China and India to today’s global demand.
According to the November OMR, which was released alongside the WEO 2017 by the International Energy Agency (IEA), recently, “output of 32.53 mb/d, the lowest since May, was down 830 kb/d from the record rates seen a year ago.”
The IEA in the OMR, explained that the aforementioned proportion of drop in output were as a result of real interruptions in Iraq where shipments from the North fell by an estimated 170 kb/d in October, as well as lower production in Algeria, Nigeria and Venezuela. “These supply disruptions, geopolitical concerns, a growing expectation that the OPEC/non-OPEC output accord will be extended through 2018 at the end of the month, and with demand growth still robust,” it added, “largely explain firmer prices.”
Pointing out that, the compliance rate with supply cuts in October was 96 per cent, the report added that, for the year-to-date, it was 87 per cent.
The OMR explained that higher prices and relatively mild early winter temperatures contributed to a downward review of IEA’s demand forecast. “Growth has been revised down by 0.1 mb/d for both 2017 and 2018 and we now see increases of 1.5 mb/d in 2017 (or 1.6 per cent), to 97.7 mb/d, and 1.3 mb/d in 2018 (or 1.3 per cent) to 98.9 mb/d,” it noted.
Nevertheless, the OMR stated that global oil supply rose 100 kb/d in October to 97.5 mb/d on higher flows from non-OPEC countries. According to the report, “production was 470 kb/d below a year ago, with OPEC supply sharply down from high 4Q16 levels. Non-OPEC supply is expected to rise by 0.7 mb/d in 2017 and 1.4 mb/d next year, led by higher US output.”
It recalled that Hurricane Harvey contributed to OECD industry stocks falling by 40 mb in September to below 3,000 mb for the first time in two years. “Global stocks dropped by 63 mb in 3Q17, only the second quarterly draw since 2014. In October, stocks drew in the US and likely in China, but rose elsewhere.”
Similarly, the OMR reported that benchmark crude prices increased by $1-2 per barrel in October versus September and pushed higher in early November, buoyed by tensions in the Middle East. Oil product markets weakened relative to crude following the return of US refineries to higher throughput levels.
For 4Q17, it noted that, “Our refining throughput forecast is revised marginally lower to 80.8 mb/d, but refined product inventories are forecast to build as demand seasonally slows down. Relatively robust refining activity level continues into January and February 2018, with runs forecast to grow 1.1 mb/d y-o-y.”
Besides, the November OMR stated: “Our analysis of global oil balances implies oversupplied crude oil markets in 4Q17 and 1Q18. While refined product inventories are also forecast to increase, the main oil stock draws are expected from increased seasonal demand for LPG.”
Meanwhile, the WEO 2017 noted that its projection on the global energy demand was strengthened by “a global economy growing at an average rate of 3.4 per cent per year, a population that expands from 7.4 billion today to more than 9 billion in 2040, and a process of urbanisation that adds a city the size of Shanghai to the world’s urban population every four months.”
According to the report, “The largest contribution to demand growth – almost 30 per cent – comes from India, whose share of global energy use rises to 11 per cent by 2040 (still well below its 18 per cent share in the anticipated global population).
“Southeast Asia is another rising heavyweight in global energy, with demand growing at twice the pace of China. Overall, developing countries in Asia account for two-thirds of global energy growth, with the rest coming mainly from the Middle East, Africa and Latin America,” it added.
The WEO 2017, themed: A World in Transformation, explained that, “Four large-scale shifts in the global energy system set the scene for the World Energy Outlook 2017: the rapid deployment and falling costs of clean energy technologies, the growing electrification of energy, the shift to a more services-oriented economy and a cleaner energy mix in China, and the resilience of shale gas and tight oil in the United States.”
These shifts, it noted, came at “a time when traditional distinctions between energy producers and consumers are being blurred and a new group of major developing countries, led by India, moves towards centre stage.”