OPEC says oil markets will rebalance in second half 2016

OPEC says global oil supply and demand will start to rebalance from the second half 2016 in its Oil Market report released today.

“Provided that there is a clearer picture regarding oil supply and demand, the expected improvement in global economic conditions should result in a more balanced oil market toward the end of the year,” the group said on Monday.

The Vienna-based research unit of the oil cartel projected an increase of global oil demand by 1.2 million barrels a day, this year, to 94.18 million, with India leading global demand.

“Other Asia, led by India is anticipated to be the main contributor to oil demand growth in 2016. Similar to 2015, transportation fuels, supported by healthy vehicle sales and the low oil price environment, are projected to provide the bulk of expected growth. The 2015 growth estimate was also left unchanged at 1.54 mb/d to average 92.98 mb/d.”

According to the report, non-OPEC production will fall by 740,000 barrels a day from 2015 to 56.4 million barrels a day in 2016.  It expects the downward revision in Canada, Brazil and

Colombia broadly offset upward revisions in the US, UK, Russia and Azerbaijan.

OPEC predicts that US production this year, will fall by 420,000 barrels a day from 2015 to 13.57 million barrels a day.  US output will shrink by 150,000 barrels a day in the quarter 3 2016 compared with the first half as producers cut production due to a low oil price environment.

Oil futures rally in recent times; the report noted is buoyed by unexpected events, wildfires in Canada, resurgence of militancy in Nigeria, which has cut production to 20-year low.

“These unexpected outages exacerbated other enduring supply concerns, particularly a decline in US shale oil production and export limitations due to regional conflict. The timing of these unplanned outages was ideal to buoy market sentiment, as they came just ahead of a seasonal, and therefore widely expected, global period of tightening in 3Q16. Oil futures’ strong performance was also supported by positively noted higher 1Q16 oil demand, particularly for gasoline.