Oil could end year at $50-60/bbl say analysts but is Nigeria ready?

Brent oil is trading at a high of $47.90 a barrel this morning after it emerged that the International Energy Agency is more likely to raise forecasts for oil demand than cut them because of a booming global gasoline market and India’s increasing thirst for crude.

US rig count is down significantly and shale oil production has crimped by about 40% in the last year.

Some senior oil chiefs are now predicting that the price of Brent could end the year between $50 and $60 a barrel to close what will be one of the most turbulent years for the oil industry in years.

Data how show that demand growth in the first three months of 2016 was 200,000 barrels a day higher than earlier anticipated at 1.4m b/d, the world’s leading energy forecaster said on Thursday, with India responsible for almost a third of the upward revision.

“India saw the largest volume growth globally,” said the IEA in its closely watched monthly oil market report. “With demand at 4.4m b/d in the first quarter, India is the world’s fourth biggest oil consumer behind the US, China and Japan.”

Although the IEA left its forecast for global demand growth unchanged at 1.2m b/d for the year it said the risks to future forecasts was to the upside citing gasoline demand growth which his said was growing “strongly in nearly every key market”.

Gasoline (petrol) has been one of the bright spots during the oil market downturn that has seen prices slump more than half from $100 since mid-2014. On

Ahead of Thursday’s report there had been speculation among analysts that the IEA could increase its demand growth forecast in spite of recent data that has pointed to slowing global economic expansion.

Preliminary US government data earlier this week showed petrol demand in the world’s largest oil consumer had hit 9.65m barrels a day last week, the highest since last summer and approaching record levels reached before the financial crisis.

Rising demand is one of the factors that could help accelerate the rebalancing of the oil market, which has been weighed down by oversupply for almost two years.

After increasing by 1.3m b/d in the first half of 2016, the IEA sees global oil stocks rising by just 200,000 in the remainder of the year as supply and demand come into line. The Paris-group plans to publish detailed forecasts for 2017 next month, which will provide clarity on when the oil market reaches its much talked about balance.

On the demand side, the IEA said it had revised its forecast for the decline in non-Opec production this year to 800,000 b/d from 700,000 b/d previously because of devastating wildfires in Canada and unscheduled shutdowns in Ghana and India.

There have also been disruptions to supply in Opec countries such as Libya, Nigeria — Shell this week declared force majeure on Bonny Light output — and Venezuela, where it has been difficult to maintain operations in the face of power cuts.

Supply outages have provide a prop for crude prices over the past month, helping to ease nerves in April after major producers failed to agree on a deal to freeze output. It has also offset rising supplies from Iran.

Iranian oil production in April neared 3.6m b/d, according to the IEA, a level last reached in November 2011. Iranian exports hit 2m b/d, a jump from 1.4m b/d in March. “China was by far the biggest buyer of Iranian crude in April,” the IEA report said.

The IEA said Opec kingpin Saudi Arabia, which replaced its veteran oil minister Ali al-Naimi at the weekend, could easily increase production to 11m b/d from 10.2m b/d currently, should it choose to do so.

The country’s powerful Deputy Crown Prince Mohammed bin Salman last month warned Saudi Arabia could raise output, especially if regional rival Iran did not agree to join the production freeze deal, which collapsed shortly after his comments.

The IEA said Saudi Arabia, the world’s largest oil exporter, could also quickly raise supplies to 11.5m b/d, though it would be more costly to so since more expensive offshore production would have to be tapped.

“As yet, there is no indication of a substantial increase in oil sales, with production in April steady at 10.19m b/d compared to March,” the IEA said. “Riyadh does, however, appear to be taking a slightly more flexible approach in its marketing effort.”

Last month, Saudi Aramco, the state-oil company, made its first sale of a spot cargo to a Chinese “teapot” refinery. The IEA said early indications suggested Saudi Arabia would increase production by 300,000 b/d next month but only to cover higher domestic requirements for power generation.