Baku, Azerbaijan, Dec.12
By Leman Zeynalova – Trend:
Oil supply restraint related to production cuts will be offset by increased supply from non-OPEC countries, according to the UN World Economic Situation and Prospects 2018 report.
“OPEC and non-OPEC oil exporters, including Azerbaijan, Kazakhstan and the Russian Federation, agreed to implement a coordinated reduction in production from January 2017 to March 2018, amounting to 1.8 million barrels per day (bpd) in total, although considering compliance performance, actual cuts may be considerably less. Meanwhile, supply restraint related to production cuts will be offset by increased supply from non-OPEC countries,” said the report.
However, UN analysts believe that the oil market is in the process of rebalancing, as demand growth surpasses supply growth.
“The level of commercial crude oil stock has already been in decline despite rapid crude production growth in the United States. The market is likely to rebalance by the first quarter of 2018, eroding the excess crude oil inventory built up since 2014,” said the report.
The analysts said that crude oil supply from non-OPEC countries in 2017 is forecast to increase, driven by the United States.
“In total, world crude oil supply for 2017 is expected to record a modest rise from 2016 levels. Strong demand is expected from China, India and the United States — the world’s three largest energy consumers. A recovering demand from Europe is another supporting factor for the solid growth projection coupled with the recent rise in refining margins in Asia, Europe and the Americas throughout 2017,” said the UN.
The report said that while prices may continue to fluctuate in response to the short-term news, the Brent spot price is expected to average $52.5 per barrel in 2017 and $55.4 per barrel in 2018. “Compared to average levels in 2011–2014, price levels have roughly halved.”
Amid a rebalancing of demand and supply, the price of Brent crude oil is assumed to average $52.5 per barrel in 2017, $55.4 per barrel in 2018 and $59.7 per barrel in 2019, according to the report.
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