ESAI expects oil price lift in 2H2017

Oil&Gas Materials 2 December 2016 13:57 (UTC +04:00)

Baku, Azerbaijan, Dec.2

By Leman Zeynalova – Trend:

In terms of market impact, OPEC Vienna deal at first glance, is impressive since it has the potential to remove a significant volume of crude oil from the market, according to the analysts of the Energy Security Analysis (ESAI), US-based global energy consulting company.

During the Vienna meeting held Nov.30, OPEC members decided to implement a new OPEC-14 production target of 32.5mb/d, said the cartel’s website.

The decision was made in order to accelerate the ongoing drawdown of the stock overhang and bring the oil market rebalancing forward.

The agreement will be effective from January 1, 2017.

“However, against this reduction in output, one must consider gains in Libya and Nigeria, which ESAI Energy estimates could increase by a combined 550,000 b/d between November and the end of the first quarter of 2017,” said the analysis obtained by Trend. “This cuts the utility of this agreement down to about 600,000 b/d.”

Given the production cut outlined above and gains in Nigerian and Libyan output, ESAI Energy estimates OPEC production will average 32.4 million b/d in the first half of 2017. Thus, the first half of 2017 will not technically fall into deficit, according to the analysis.

“By the third quarter, all other things held equal, a renewal of the agreement would clearly lead to a supply/demand deficit,” said the analysis. “This will certainly lift crude oil prices in the second half of 2017, and it will encourage higher prices in the interim, especially if these promises all come to pass.”

According to ESAI Energy estimates, the global oil demand 93.9 million b/d in 2016 and 95.2 million b/d in 2017.