(MENAFN- Arab Times) WTI crude oil price increased by 1.70% during the review period (May 15-Jun 10, 2015) to $59.15 per barrel. The rise was supported by the weakening of the US dollar, inventories drawdowns, high demand at the start of the North American driving season and supply concerns in the Middle East following fighting in Iraq, Yemen and Syria. However, warnings of more oversupply as a result of OPEC's decision to keep pumping crude without restraint capped gains.
US economy contracted 0.7 percent in the first quarter, revising its initial estimate of 0.2 percent growth driven by bad weather along with a slowdown in consumer spending and the strengthening of the US dollar. The first quarter also saw a significant reduction in investment by energy companies in exploration and drilling as a result of the drop in oil prices over the past year.
However, growth in 2Q15 and 3Q15 is still expected given the ongoing improvement in the labor market as it added 280,000 new jobs in May, the highest monthly figure since late 2014, and the better-than-expected activity of the housing market.
On the other hand, Euro-zone retail sales rose 0.7% and unemployment fell in April to 11.1 percent of the workforce from a downwardly revised 11.2 percent in March but challenges remain due to the uncertainty in Greece's situation. Meanwhile, Japan showed some improvement as the manufacturing activity expanded in May for the first time in two months, rising industrial output, gains in business investment in 1Q15 and increasing exports. However, activity in China is still facing some difficulties as its factory activity shrank for a third consecutive month in May as export orders contracted at the sharpest rate in nearly two years.
World oil demand growth in 2015 is expected to rise by 1.18mnbpd, unchanged from last month's projections, to average 92.50mnbpd. Total OECD demand in 2015 remained the same with no upward revisions in all quarters. The US oil demand growth in 2015 is projected to be at 0.19mnbpd and it remains dependent on the development of the economy. The European oil demand continues to be positive due to improving industrial production and a growing auto market.
Total OPEC production averaged 30.98mnbpd in May, up from 30.95mnbpd the previous month, according to secondary sources. Crude oil production ex-Iraq was at 27.18mnbpd in April, a decrease of 0.08mnbpd from April. The increase mostly came from Saudi Arabia and Iraq, in addition to Angola which exported 58 cargoes in May, more than originally planned in April. However, the largest drop was from Libya and Nigeria.
Libya posted a decline as more supply was disrupted by unrest, and production in Nigeria slipped because of pipeline leaks that prompted Royal Dutch Shell's local venture to declare force majeure on exports from the Forcados stream. According to direct communication, Saudi Arabia's output rose to 10.33mnbpd in May due to increased global demand and the needs of its customers.
Iran and six world powers resumed negotiations on its nuclear programme, seeking to overcome several major issues including access for UN nuclear inspectors to Iranian military sites and the pace and timing of sanctions relief for Tehran. Iranian Oil Minister Bijan Zangeneh said that Iran will be able to pump 0.50mnbpd extra after a month of lifting the sanctions and 1.00mnbpd after 6-7 months.
Meanwhile, India's imports of Iranian crude oil rose in May to their highest level since March 2014 as refiners boosted purchases. India shipped around 0.37mnbpd of Iranian crude in May in nine vessels, up 39 percent over April. On the other hand, Iraq's output rose to 3.80mnbpd in May, compared to 3.70mnbpd in April. Exports rose to a record 3.145mnbpd in May, with some 2.70mnbpd of that via the southern Basra terminals.
Non-OPEC Supply
Non-OPEC oil supply in 2015 is projected to grow by 0.68mnbpd to average 57.16mnbpd, unchanged from the previous report. Uncertainty in the production growth outlook for the coming period remains due to low oil prices expectations and a declining number of rigs drilling in the US. The latest report from oil services firm Baker Hughes Inc showed US oil rig count declined by four to 642 (which showed a fall for 26 weeks in a row).
Non-OPEC supply is expected to grow in 1Q15 and 4Q15. US production is expected to average 13.56mnbpd in 2015, while FSU and Latin America are anticipated to average 13.35mnbpd and 5.12mnbpd, respectively. On the other hand, the International Energy Agency (IEA) raised its forecast of supply growth from non-OPEC producers this year by 195,000bpd to 1.00mnbpd, citing an upward revision to US data and fewer summer maintenance shutdowns in other regions.
Non-OPEC oil supply in 1Q15 is expected to average 57.75mnbpd, unchanged from the previous MOMR. Total OECD oil supply in 2015 is projected to grow by 0.70mnbpd to average 24.81mnbpd, with a production of 24.98mnbpd in 4Q15. OECD Americas oil supply in 2015 is still expected to show the highest growth by 0.73mnbpd to stand at 20.72mnbpd. Total FSU oil production is estimated to average 13.35mnbpd in 2015, down from 13.43mnbpd in 2014. Latin America, which is considered to be the second-highest driver of growth in 2015, oil supply, is expected to grow by 0.08mnbpd to average 5.12mnbpd in 2015. Moreover, Middle Eastern output is projected to average 1.24mnbpd but downside risks remain due to political factors.
World Oil Demand
World oil demand growth in 2015 is expected to rise by 1.18mnbpd, unchanged from last month's projections, to average 92.50mnbpd. Total OECD demand in 2015 remained the same with no upward revisions in all quarters. The US oil demand growth in 2015 is projected to be at 0.19mnbpd and it remains dependent on the development of the economy. The European oil demand continues to be positive due to improving industrial production and a growing auto market. However, The US Energy Information Administration (EIA) raised its 2015 world oil demand growth forecast by 0.02mnbpd to 1.25mnbpd, while IEA raised its forecast for global oil demand growth in 2015 by 0.28mnbpd to 1.40mnbpd, bringing demand this year to almost 94.00mnbpd.
OECD Europe demand for 2015 stood at 13.50mnbpd, unchanged from the last MOMR, due to improving economy and lower fuel prices. Total oil demand in April for the "Big Four" economies in Europe showed strong increase YoY. Meanwhile, Japanese oil demand rose for the first time since March 2014 in April, but the gloomy economy forecasts could negatively affect demand for the rest of 2015. Meanwhile, Middle East oil demand growth for 2015 was steady at 0.22mnbpd to average 8.28mnbpd, but geopolitical concerns in some countries remain. However, China's oil demand growth for 2015 was unchanged from the previous report, with the highest growth still expected in 4Q14.
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