Quarterly oil market update (Q1 2015): Glut in Global oil markets persists

The widening of global oil surplus to 2 million barrels per day (mbpd) led to Brent prices dropping by 29 percent, quarter-on-quarter, to $54 per barrel in Q1 2015. Oil markets will continue to see large surpluses in Q2 & Q3 2015. As a result we see full year Brent crude now averaging $61 per barrel in 2015. Domestically, we estimate total Saudi oil consumption will rise to 2.7mbpd in 2015 as the latest Saudi refinery, Yasref, reaches full capacity, with rises in gas output limiting some growth of crude consumption in the domestic energy mix. This means we now project Saudi production rising to 9.8mbpd in 2015, up from 9.6mbpd in our previous forecast. The combination of higher oil output and lower prices will affect the macroeconomic outlook for the Kingdom. Real GDP in the Kingdom is likely to benefit from higher oil output while fiscal and external balances are expected to remain in deficits.