MENAFN - Arab Times
Kuwait oil climbs to $107
(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.
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.
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.
MENA News Headlines
|Mar 9 2014||UAE's Al Hamra launches USD272 m project ,MENAFN|
|(MENAFN) UAE's Al Hamra Real Estate Development has announced the opening of the USD 272 million Falcon Island project in Ras Al Khaimah, according to Khaleej Times.
The new project aims to ...|
|Mar 9 2014||Oman aims to increase non-oil exports by 15 percent ,MENAFN|
|(MENAFN) Oman is aiming to increase the value of its non-oil exports by 15 percent this year, Times of Oman reported.
The Director of Export Development at Ithraa said that Oman's exports of ...|
|Mar 9 2014||Oman's government revenue drops 7.9 percent ,MENAFN|
|(MENAFN) Oman's National Centre for Statistics and Information (NCSI) said that the country's government revenues dropped 7.9 percent in January, Times of Oman reported.
The NCSI said that ...|
|Mar 9 2014||Oman's foreign trade up 9.1 percent ,MENAFN|
|(MENAFN) Statistics released by the Omani National Centre for Statistics and Information (NCSI) show an increase in the Sultanate's foreign trade, Times of Oman reported.
The data show that the ...|
|Mar 9 2014||Dubai-based Deyaar plans USD245m residential, hotel project ,MENAFN|
|(MENAFN) UAE-based Deyaar Development announced its plan to build a residential and hotel project in Dubai, Arabian Business reported.
The project, at a total cost of USD245 million, will consist ...|
|Mar 9 2014||UAE's Jumbo plans expansion ,MENAFN|
|(MENAFN) UAE-based retail electronics giant Jumbo Group announced that it plans to expand its engineering and B2B businesses as well as its retail footprint in the GCC, India and Iran, Arabian ...|
|Mar 9 2014||New fashion company plans IPO in Dubai ,MENAFN|
|(MENAFN) A retailing company still being formed is planning for its first initial public offering (IPO) on Dubai's main stock market in five years, Arabian Business reported.
The company will ...|
|Mar 9 2014||UAE's du signs agreement with international telecom companies ,MENAFN|
|(MENAFN) du, the Middle East"s fastest growing telecom service provider, has joined an international consortium that includes several telecom companies to build South East Asia - Middle East -Western ...|
|Mar 9 2014||UAE's RTA wins USD27 m contract ,MENAFN|
|(MENAFN) UAE's Board of Directors of the Roads & Transport Authority (RTA) has won a contract to construct and collector internal roads at Al Barsha South 1 and Al Barsha South 2, according to the ...|
|Mar 9 2014||Dubai's Emirates to sign off USD76 b deal with Boeing ,MENAFN|
|(MENAFN) Dubai"s Emirates said it will cancel its USD76 billion purchase of Boeing 777X wide-body planes for reasons, such as performance guarantees, according to Arabian Business.
The order ...|
|Mar 9 2014||La Liga Preview: Real Madrid v Levante ,Kora|
|(MENAFN - Kora) Carlo Ancelotti's side rescued a 3-2 win at Estadi Ciutat de Valencia in October with stoppage-time goals from Alvaro Morata and Cristiano Ronaldo.
They will enter this weekend's ...|
|Mar 9 2014||Steyn, Johnson absent for T20 series ,Kora|
|(MENAFN - Kora) Mitchell Johnson has been rested for the three-match series, returning to Australia ahead of the World Twenty20 in Bangladesh.
Dale Steyn battled through South Africa's third Test ...|
|Mar 9 2014||Lee, Son progress to Birmingham last four ,Kora|
|(MENAFN - Kora) Malaysia's Lee thrashed Japan's Kento Momota 21-14 21-18 in their quarter-finals at the National Indoor Arena in Birmingham.
He will face Son Wan Ho in the last four after the ...|
|Mar 9 2014||Copa Libertadores Preview: Atletico Mineiro, Velez Sarsfield near progression ,Kora|
|(MENAFN - Kora) Both teams have claimed two wins from as many games in their groups and a third € halfway through the stage € would set them up nicely.
Mineiro have edged their way to the top of ...|
|Mar 9 2014||Davids: Del Piero should delay coaching plans ,Kora|
|(MENAFN - Kora)
The Sydney FC star, 39, is nearing the end of his career and is yet to re-sign with the A-League club, having been linked with another move to Asia.
Davids, who played alongside ...|
|Mar 9 2014||Blanc confirms Cavani will miss Bastia trip ,Kora|
|(MENAFN - Kora)Cavani returned to Uruguay earlier in the week for personal reasons and will not be back in time for Saturday's match.
The 27-year-old has scored 14 goals in 22 league appearances ...|
|Mar 9 2014||Barca are not in decline, Xavi insists ,Kora|
|(MENAFN - Kora) Barca secured three La Liga titles, two Copa del Rey medals and twice won the UEFA Champions League under the stewardship of former coach Pep Guardiola,
Tito Vilanova carried on ...|
|Mar 9 2014||UAE's Majid Al Futtaim sign agreement with HCT ,MENAFN|
|(MENAFN) UAE-based retail giant Majid Al Futtaim and Higher Colleges of Technology (HCT) have signed an agreement to launch a retail academy and industry consortium, according to Arabian ...|
|Mar 9 2014||Northampton book Anglo-Welsh Cup final spot ,Kora|
|(MENAFN - Kora) George Pisi was the star of the show for the 2010 winners at Franklin's Gardens as he completed a hat-trick in the second half to complete a comfortable victory.
Saracens struggled ...|
|Mar 9 2014||Wenger delighted with Ozil showing ,Kora|
|(MENAFN - Kora) Ozil opened the scoring with a well-taken side-footed finish from inside the area before showing good awareness to lay on Arsenal's fourth for substitute Olivier Giroud late on. ...|