Quotes: US MENA   Enter Symbol: NewsLetter: Search: advanced

Kuwait oil climbs to $107  Join our daily free Newsletter

MENAFN - Arab Times - 17/12/2013
No. of Ratings : 0
Add to Mixx!



(MENAFN - Arab Times) After dipping sharply in early November, crude oil prices rallied through the rest of the month, regaining all of the previously lost ground. The price of Kuwait Export Crude (KEC) rose from a low of 101 per barrel (pb) in early November to 107 a month later, 3 above its November average.
Brent crude prices also rose from a low of 103 in early November to 114 well above the trading range for most of the year. The price of West Texas Intermediate (WTI) the main US crude benchmark once again bucked the trend, failing to see any sort of bounce until the first few days of December. At a price of 92 WTI's discount to Brent reached 20 in late November, its highest since March.


The rise in crude prices came as markets digested the implications of the late November deal between the international community and Iran over the latter's nuclear program. The deal suspends any tightening of current oil sanctions, and paves the way for a possible return of up to 1 million barrels per day (mbpd) of Iranian oil exports to the global market next year. However, although the deal is bearish for oil prices over the long-term, it releases little or no extra oil on the market for the next few months, and there is no guarantee that a final agreement will be reached next May. Meanwhile, a slew of encouraging economic data particularly in developed economies has boosted the prospect of global oil demand soaking-up the large expected rise in non-OPEC supply next year.


Separately, WTI's discount to Brent has re-established itself as a notable feature of the global oil market. The rise in the discount has been driven by a build-up in US crude stock levels, thanks mainly to a continued rise in US tight oil production. But in addition, Brent as the main international benchmark has found support from global factors, including the disruptions to supply in key producers such as Libya, Iraq and Iran. In principal, this confers a competitive advantage to US energy intensive industries. This includes US refiners, who gain access to cheap US crude feedstock, but who can then sell refined products at higher global rates. But this should be set against the cost to US crude producers, who for legal reasons must sell their product in the domestic market.

Oil demand outlook
Analysts' forecasts for global oil demand growth have diverged over the past month. The International Energy Agency (IEA) have slightly reduced their forecasts for next year in line with lower economic growth expectations in the US and China. They see demand growing by 1.1 mbpd in 2014, or 1.2%, up from 1 mbpd in 2013. Meanwhile, the Center for Global Energy Studies has revised up its projections for global oil demand growth in 2014 to 1.2 mbpd (1.3%) from 1.1 mbpd (1.2%) last month, reflecting expectations of stronger OECD consumption. Demand in the developed world is expected to decline once more, but by a smaller amount than in 2013. Demand in developing countries is seen rising by slightly more than in 2013.

Oil supply outlook
Crude output of the OPEC-11 (excluding Iraq) fell for the third consecutive month, plunging by 604,000 bpd to 28.1 mbpd in October according to data provided by 'direct communication' between OPEC and national sources. This came on the back of steep declines in Saudi Arabia (370,000 bpd) and Iran (317,000 bpd). Saudi output was reduced to below 10 mbpd for the first time in 4 months as a result of the seasonal wind-down in crude demand at domestic power plants. Kuwait and the UAE also cut output slightly at the end of the hot summer months, with field maintenance in Kuwait likely to continue to affect output through mid-November. Iranian production reportedly fell to 3.2 mbpd in October, though secondary sources cite lower output levels of around 2.7 mbpd. Further large declines in Iranian output are unlikely following a softening of US measures that force buyers of Iranian crude to reduce imports.


Iraq and Libya saw the largest output gains in October (130 kbpd or so). Escalating security issues in both countries are expected to have curtailed production in November, with some international oil firms looking to reduce operations or even exit from Libya. At its December 4th meeting in Vienna, OPEC members agreed to keep the group's output ceiling unchanged at 30 mbpd. Yet the consensus view is that with the prospect of an easing of sanctions on Iranian crude, and a possible (albeit far from guaranteed) recovery in Libyan and Iraqi production the task of adhering to the target may prove difficult. Saudi Arabia the organization's unofficial swing producer may be required to make more significant production cuts next year.
Non-OPEC oil supplies are projected to increase by a significant 1.6-1.8 mbpd in 2014, of which 0.2 mbpd is expected to come from OPEC (but not subject quota) natural gas liquids. Non-OPEC supply growth will be led by the continued boom in North American production. If aggregate OPEC output remains at current levels (with cuts in Saudi output offsetting increases by other OPEC producers), it should fall on average next year but global supplies could still increase by up to 1.3 mbpd, following an expected increase of 0.8 mbpd in 2013.

Price projections
Unchecked, surging non-OPEC production and a potential rise in output from certain OPEC producers could materially weaken oil market fundamentals next year. Other OPEC members notably Saudi Arabia may therefore need to manage supply more tightly in order to maintain prices at above 100. Using the CGES's forecast of a 1.2 mbpd increase in global oil demand in 2014 and a significant 1.8 mbpd increase in non-OPEC supplies, global inventories could rise by 0.5 mbpd.

If OPEC holds output near current levels resulting in a year-on-year cut in its average output of 0.5 mbpd the price of KEC would slip only slightly from 104 in early 2014 to just under 100 by year-end.
If, on the other hand, OPEC is unable to restrict production at current levels, then oil inventories could rise by a large 0.8 mbpd in 2014. The price of KEC drops quickly below 100 in 2Q14, and further thereafter.
Alternatively, non-OPEC supplies could turn out to be 0.3 mbpd lower than expected, causing oil prices to rise sharply next year. In this scenario, the price of KEC rises to just under 110 by mid-2014, before accelerating to 120 in the second half of the year. These last two scenarios would likely prompt OPEC to adjust its output in order to prevent prices moving too far in either direction.


Budget projections
The three scenarios above generate oil prices in the narrow range of 103 to 104 in the current fiscal year, with the impact on prices largely felt next year. With oil prices projected to average 3-4 lower than last year, government revenues may fall slightly in FY13/14. If government spending, as expected, comes in 5-10% below its official target of KD 21.0 billion, the budget would see a surplus of between KD 11.6 billion and KD 12.9 billion before allocations to the RFFG. This would equate to 23%-26% of forecast 2013 GDP.

 


Arab Times




  MENA News Headlines
 Oct 25 2014 - Qatar's inflation rate to hit 5.5 percentMENAFN
(MENAFN) Qatar's inflation rate in 2014 is expected to touch 5.5 percent due to steady rise in housing rentals, according to the finding of a research conducted by Standard Chartered, The Peninsula ...

 Oct 25 2014 - Flydubai launches two flights to TanzaniaMENAFN
(MENAFN) Dubai-based flydubai's inaugural flights to Dar es Salaam and Zanzibar touched down in Tanzania. The new routes further underline flydubai's rapid expansion in Africa, which has seen the ...

 Oct 25 2014 - UAE air cargo to grow 4.1 percent in 5 yearsMENAFN
(MENAFN) The International Air Transport Association (IATA) Airline Industry Forecast 2014-2018 shows that international freight volumes are expected to increase at a compound annual growth rate ...

 Oct 25 2014 - Qatar- QSL: El Jaish face Al Gharafa todayThe Peninsula
(MENAFN - The Peninsula) Third-placed El Jaish will seek to narrow the gap between them and two higher placed rivals - Lekhwiya and Al Sadd € when they take on Al Gharafa in the ninth round match of ...

 Oct 25 2014 - Somalia- Mogadishu port on development pathThe Peninsula
(MENAFN - The Peninsula) Camels are prepared for export at the loading dock at the seaport in Mogadishu. The Somali government's grand vision for Mogadishu port under its new Turkish managers sees ...

 Oct 25 2014 - Saudi Shias protest death sentencesThe Peninsula
(MENAFN - The Peninsula) More than 100 people protested in eastern Saudi Arabia yesterday to oppose death sentences against a Shia religious leader and seven others convicted after earlier ...

 Oct 25 2014 - Palestine defies US, issues statehood ultimatumThe Peninsula
(MENAFN - The Peninsula) Palestine's chief peace negotiator has laid out in the clearest terms yet plans to establish an independent Palestinian state within three years, even if it means ignoring ...

 Oct 25 2014 - Police kill six militants ahead of key Tunisian pollThe Peninsula
(MENAFN - The Peninsula) Tunisian police killed six suspected militants, five of them women, in a raid on a suburban house yesterday after a 28-hour standoff, fanning tensions ahead of a landmark ...

 Oct 25 2014 - US looking into possible chlorine gas attack in Iraq: KerryThe Peninsula
(MENAFN - The Peninsula) The United States is looking into reports that Islamic State fighters used chlorine gas against Iraqi security forces, US Secretary of State John Kerry said yesterday.Kerry, ...

 Oct 25 2014 - Qatar- Ooredoo marathon offers QR1m prizesThe Peninsula
(MENAFN - The Peninsula) Registration for Ooredoo Doha Marathon 2015 is open, as the company begins preparations to ensure its biggest event yet on January 9.It will provide an opportunity to meet ...

more...


 






Google

Click to Apply

 
 

Middle East North Africa - Financial Network

MENAFN News Market Data Countries Tools Section  
 

Middle East North Africa - Financial Network
Arabic MENAFN

Main News
News By Industry
News By Country

IPO News
Islamic Finance News
Private Equity News

How-To Guides
Technology Section

Travel Section

Search News

Market Indices
Quotes & Charts

Global Indices
Arab Indices

US Markets Details

Commodoties

Oil & Energy

Currencies Cross Rates
Currencies Updates
Currency Converter

USA Stocks
Arab Stocks
 

Algeria 
Bahrain 
Egypt 
Iraq
Jordan 
Kuwait 
Lebanon
Morocco 
Oman 
Palestine
Qatar 
Saudi Arabia 
Syria
Tunisia 
UAE 
Yemen

Weather
Investment Game
Economic Calendar
Financial Glossary

My MENAFN
Portfolio Tracker

Voting

Financial Calculators

RSS Feeds [XML]

Corporate Monitor

Events

Real Estate
Submit Your Property

Arab Research
Buy a Research

Press Releases
Submit your PR

Join Newsletters


 
© 2000 menafn.com All Rights Reserved.  Terms of Service | Privacy Policy | Contact Us | Advertise | About MENAFN | Career Opportunities | Feedback | Help