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Oil Market Outlook for 2017 - December 2016

Source: OPEC_RP161202 12/14/2016, Location: Europe

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The recent pick-up in global economic activity in combination with supportive developments in the oil-market is seen leading to higher economic growth of 3.1% in 2017, following 2.9% growth in 2016. However, some downside risks prevail as policy decisions may lead to the use of stimulus measures that may lift inflation to levels higher-than-anticipated by central banks. This in turn could lead to a quicker-than-expected rise in interest rates triggering numerous repercussions on economic growth in various economies, mainly in emerging markets. Despite these uncertainties, the economic landscape is expected to improve in 2017. The OECD economies are forecast to grow at 1.7%, the same level as in 2016. Russia and Brazil are forecast to grow by 0.8% and 0.4% in 2017, respectively, after two years of recession. China and India are forecast to expand at a slightly slower pace in 2017 Ė at 6.2% and 7.1%, respectively, compared 6.7% and 7.5% in 2016 Ė growth remains encouraging.

World oil demand growth is estimated at 1.24 mb/d in 2016 supported by the transportation sector, reflecting low retail prices and better-than-anticipated vehicle sales. In the non-OECD, Other Asia and China saw solid-to-steady oil demand growth. In Latin America and the Middle East, oil requirements were lower than initial projections as slower economic developments and a high level of substitution dampened oil consumption. In 2017, world oil demand is projected to grow by 1.15 mb/d. In OECD, oil demand is projected to rise in OECD Americas, flatten in Europe and continue declining in Asia Pacific. In non-OECD, improvement in economic activities is assumed to provide support to oil demand growth, particularly in Latin America and the Middle East.

Non-OPEC oil supply in 2016 is estimated to contract by 0.78 mb/d. The main contributors to this decline are the US, China, Mexico, Colombia and other OECD Europe, while growth is anticipated to come from Russia, Brazil, Congo and the UK. Low oil prices led to a decline of 420 tb/d in US oil production. Declines are also seen coming from Colombia and China, as well as Canadian conventional crude output. In 2017, non-OPEC oil supply is projected to grow by 0.3 mb/d, despite initial projections in July 2016 for a contraction (Graph 2). This is mainly due to higher price expectations for 2017. The main contributors to non-OPEC supply growth are Brazil with 0.25 mb/d, Kazakhstan with 0.21 mb/d, and Canada with 0.17 mb/d. In contrast, Mexico, US, China, Colombia, and Azerbaijan are expected to show the main declines. However, this forecast remains subject to a number of uncertainties, including the pace of economic growth, potential new policies and price developments.

Based on the above forecasts, the demand for OPEC crude in 2017 is expected to stand at 32.6 mb/d, which is slightly higher than the 32.5 mb/d level referred to in the most recent OPEC Ministerial Conference. This, combined with the joint cooperation with a number of non-OPEC countries in adjusting production by around 0.6 mb/d, will accelerate the reduction of global inventories and bring forward the rebalancing of the oil market to the second half of 2017.

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Azerbaijan >>  5/23/2017 - Azerbaijanís oil supply forecast for 2017 remained unchanged with a contraction of 70 tb/d to average 0.78 mb/d, while oil production in 2016 declined...
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