- The global demand outlook for 2016 has been raised following the release of robust preliminary 4Q16 numbers. Colder weather in northern Europe provided impetus as did rapid industrially-driven Asian growth. Global oil demand growth for 2016 is now expected to be 1.5 mb/d, slowing to 1.3 mb/d in 2017 as product prices potentially rise.
- Global oil supplies fell by more than 0.6 mb/d in December, to 97.6 mb/d on lower OPEC and non-OPEC output. For 2016, world supply was up 0.3 mb/d from the previous year as record OPEC output more than offset a 0.9 mb/d decline in non-OPEC.
- OPEC crude production, now excluding Indonesia, fell 320 kb/d from record rates to 33.09 mb/d in December after lower Saudi output and disruptions in Nigeria curbed supply. Early indications suggest a deeper OPEC reduction may be under way for January, as Saudi Arabia and its neighbours enforce supply cuts.
- Non-OPEC supplies are forecast to grow by 385 kb/d in 2017, as higher prices in the wake of an anticipated coordinated supply cut stimulate increased investment in the US. Recovering LTO production underpins a 320 kb/d gain in total US output this year.
- OECD industry stocks fell across crude and oil products in November, marking a fourth consecutive monthly decline. Taking into account preliminary data for December, stocks are 82 mb below July’s historical peak, even if for now they remain above the symbolic 3 000 mb level.
- Oil prices rose in early December and stayed within a $53-57/bbl range thereafter. Dubai, after weakening initially, gained versus other benchmarks due to lower expected OPEC output, opening the arbitrage to Asia for Brent and WTI-linked crudes. Fuel oil was a strong performer due to supply shortages.
- Higher estimates for 4Q16 global refinery crude throughput – up by 160 kb/d – were partly responsible for a 260 kb/d downward revision for 1Q17. Our analysis of refined product stocks movements shows a 4Q16 build in the OECD, with the overhang in non-OECD implied refined product inventories persisting.
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