Oil market

In-depth reports on key Oil market.

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    Sun, 12 November 2017

    Quarterly Oil Market Update - Q3 2017: (OPEC's big decision)

    In its latest monthly oil report,  OPEC has raised global oil demand forecasts for the third consecutive month, underlining the bullish tone towards oil prices in recent months.  These revisions combined with geopolitical developments in Iraq helped push Brent oil prices up 6 percent quarter-on-quarter in Q3 2017, to an average of $52 per barrel (pb). More recently, rising expectations related to OPEC rolling over cuts in an upcoming meeting and regional geopolitical tensions have pushed Brent crude oil prices back above $60 pb. Prices are likely to remain elevated in the near term due to continued regional geopolitical tensions. 

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    Sun, 10 September 2017

    Shale Oil 2.0

    The recently observed uptick in oil prices has given many US shale oil producers the opportunity to expand production. Latest forecasts from the Energy Information Administration (EIA) see US oil production rising by 10 percent year-on-year in 2017, and 3.3 percent in 2018. Nevertheless, shale oil exploration and production (E&P) companies face a number of potential ‘bumps in road’ that could hinder their progress and recovery in the near-to-medium term. Besides higher borrowing costs, shale oil producers also face the possibility of constrained capacity leading to inflated operating costs. One area where costs are likely to rise is related to oilfield services, which includes the cost of rigs, equipment and personnel.  

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    Tue, 25 July 2017

    Quarterly oil market update- Q2 2017: (OPEC Discipline Waning?)

    Oil prices declined by 8 percent quarter-on-quarter in Q2 2017, the first such decline since Q1 2016. Higher OPEC oil production, mainly from Nigeria and Libya, plus continued rises in US oil production, were the primary triggers for the slump in prices. Going forward, doubts remain over OPEC’s ability to, firstly, maintain discipline amongst members and, secondly, prevent sizable increases in supply from Libya and Nigeria. In addition, as the recovery in US oil production continues, with US shale oil supply expected to achieve an all-time record high in the next few months, the risk to oil prices remains firmly skewed to the downside.

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    Tue, 18 April 2017

    Quarterly Oil Market Update: (Volatility Returns to Oil Markets)

    Oil prices rose 10 percent quarter-on-quarter in Q1 2017, but volatility levels were up too, especially towards the end of the quarter.  Although both OPEC and non-OPEC cuts are contributing to a reduction in global oil balances, global commercial oil inventories nevertheless remain high. Demand is expected to pick up in H2 2017.

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    Tue, 21 February 2017

    Petrochemicals and the Vision 2030

    The Saudi petrochemical industry is vital to the Kingdom’s non-oil economy with chemical and plastic exports comprising a substantial 60 percent share of total non-oil exports. As a result, the sector has been identified by both the National Transformation Program (NTP) 2020 and Vision 2030 to help lead the push away from fossil fuel reliance. But this restructuring of the sector comes at a time when it is already facing up to a number of challenges, both at home and abroad. Besides seeing a drop in global chemical prices in the last two years, the sector has also seen domestic feedstock prices being raised in 2016, with further rises expected in 2020. In addition, global competition is set to intensify, especially from the US and China, where significant rises in petrochemical capacity are expected in the next few years.

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    Thu, 16 February 2017

    Quarterly Oil Market Update: All eyes on OPEC and the US

    Currently, Brent oil is trading at around $55 per barrel, with little deviation from this level in the last two months. This stability in prices is mainly due to coordinated action by OPEC and some non-OPEC members, with January crude oil production data showing OPEC’s oil output was down, month-on-month, by 900 thousand barrels per day. Despite the relatively stable start to the year, oil price volatility is likely to re-emerge during 2017 as global oil markets face up to a rising risk of OPEC noncompliance to production cuts, upward revisions in US oil production, and policy initiatives from the new US administration.

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    Sun, 04 December 2016

    Oil Note: OPEC Announces Production Cuts

    OPEC agreed to cut its own production by 1.2 million barrels per day (mbpd), to 32.5 mbpd, on 30th of November. Oil prices immediately rose by 8 percent following the announcement and could rise even further in the short term. Whether prices remain elevated will depend on OPEC implementing its agreement with discipline as well as no major rises in US shale oil supply. Overall, whilst the OPEC cuts represent an up-side risk to oil prices, due to the hurdles mentioned above, we are not revising our current forecasts just yet, but will be monitoring developments closely.

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    Sun, 16 October 2016

    Quarterly oil Market Update (Q3 2016): Are Oil Markets better off with OPEC cuts?

    OPEC’s decision to announce, but not to implement, a cut in production immediately sent Brent oil prices up 6 percent at the end of September. Prices were further supported by statements from Russia expressing its readiness to cooperate in order to limit oil output. OPEC plans on meeting in November, when the extent of OPEC cuts and individual country quotas are to be decided. Whilst the deal to cut remains fragile and fraught with numerous obstacles, as a result of the financial difficulty faced by a number of OPEC member economies, most notably Venezuela, Nigeria and Libya, there will be immense pressure to ensure some sort of deal is reached in November. In this context, we see the most likely outcome being an agreement to cut production, but only by a small amount, more akin to a production ’freeze’ rather than an outright cut. Such an agreement would underline OPEC’s intention to limit further rises in production and help stabilize oil prices at current levels (around $50 per barrel).

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    Wed, 29 June 2016

    Temporary Outages Helping Balance Oil Markets

    Brent oil prices surged to an average of $45 per barrel (pb) in Q2 2016, up 35 percent quarter-on-quarter, due to a combination of developments. Firstly, oil outages from Canada and Nigeria resulted in at least 1.5 mbpd being temporarily unavailable to global oil markets. Secondly, slowing US shale oil output resulted in year-on-year growth in US crude oil imports being consistently positive for the first time in six years. ‘Brexit’ had a relatively modest impact on oil markets, with Brent slipping back slightly below $50pb immediately following the UK’s decision to leave the European Union. The effects over the longer term are less clear, with a worse-case scenario being a global contagion effect resulting in increased volatility in global oil and financial markets. 

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    Tue, 21 June 2016

    Recovery in Oil Prices: Rebound in US Shale Oil?

    During Q1 2016, US oil production saw its first year-on-year decline in eight years and this decline is expected to continue throughout the remainder of 2016. Despite this, the recently observed uptick in oil prices presents shale oil companies with a potential life-line. Not only does it raise the possibility of hedges being taken out again, an increasing number of shale oil companies are restructuring under chapter 11 bankruptcies, thereby prolonging oil production. Concurrently, the number of drilled uncompleted wells (DUCs), all of which can be brought on-line relatively quickly, have risen in recent months. All of these developments mean that even as current oil and financial indicators point to declining production in the next two years, production could turn out to be better than expected.

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