(MENAFN- Arab Times) After two consecutive months of positive growth, average monthly oil prices declined during June-15 on the back of a number of concerns surrounding the global economy. The Greek loan repayment default had its fair share of impact on global economies and on the oil market as it pushed up USD/EUR rates thereby pushing crude oil prices as well as the prices of USD-denominated oil imports. Moreover, after Greece's successful debt deal with six of its international lenders, the USD once again rallied against major currencies (EUR, Yen and Swiss Franc) as there was a renewed focus on the possibility of a US Fed rate hike in September this year. In addition, the widening yield differentials between Europe and the US also helped to strengthen the USD.
Meanwhile, the slump in the Chinese stock markets that fell by 30 percent from a 7-year high level also affected oil prices due to the fear that China, being one of largest driver of oil demand, could face an economic slowdown. Moreover, the chances of a hard landing in China are also being speculated. The much talked about Iran nuclear deal finally went through on 14-July-15 affecting the oil market as it leads to expectations of additional supply to an already oversupplied market. However, oil prices stabilized after the expected increase in oil supply from Iran appeared to be more gradual than originally believed and believed to be more of a 2016 phenomenon. Various polls pegged the increase in Iran's oil supply at 0.25-0.5 mb/d within the next 6-12 months.
Average monthly OPEC Reference Basket price fell to USD 60.2/b in June-15, a decline of 3.1 percent from the previous month. The month closed at a sub-USD 60/b oil price level of USD 58.79/b and continued to slide in July-15 reaching USD 55.99/b on 10-July- 15 after touching its lowest point since April- 15 as concerns regarding Iran continued to affect prices. Meanwhile, Kuwait Blend Spot Price FOB averaged at USD 59.3/b during June-15, a decline of USD 1.86/b or 2.6 percent after two consecutive months of strong gains. Total OPEC production during June-2015 witnessed a strong increase of 2.4 percent or 0.744 mb/d to reach at 32.1 mb/d as compared to 31.39 mb/d in May-15.
The biggest monthly jump in production was recorded in Iraq that produced at the rate of 4.4 mb/d during the month as compared to 3.8 mb/d during the previous month, a significant increase of 0.567 mb/d or 14.8 percent. However, the IEA pointed out in a report that this surge in production is not permanent and the Iraqi government has already told major oil companies that run the southern oil fields to slow production later during 2015. Moreover, oil price were also affected after an EIA report pointed to a surprise build in stockpiles in the US. After two consecutive months of positive trend, average monthly oil prices fell in June-15 on the back of a number of concerns in the international market that included the concerns regarding Greece, strong USD, the weakness in China as well as the looming nuclear deal with Iran.
The month started with a positive trend after oil prices extended gains led by signs that the slowdown in US drilling activity could help in lesser supply from the market and would ease some concerns regarding the global oil glut. However, the momentum was short lived as oil prices started declining sliding below the USD 60/b mark after an IEA report highlighted that the biggest members of OPEC are pumping oil at a record pace. Another report from API highlighted that OPEC production increased to the highest level in almost three years. Average monthly OPEC Reference Basket price fell to USD 60.2/b in June-15, a decline of 3.1 percent from the previous month. The month closed at a sub-USD 60/b oil price level of USD 58.79/b and continued to slide in July-15 reaching USD 55.99/b on 10-July-15 after touching its lowest point since April-15 as concerns regarding Iran continued to affect prices.
On 14-July-15, Iran and world powers sealed a historic accord on its nuclear program which affected oil prices globally; however, according to industry experts, it will take decades for Iranian oil to enter the oil market as it requires setting up the necessary infrastructure. In terms of YTD-15 performance, the average OPEC Reference Basket price stood at USD 55.21/b, 42.7 percent lower as compared to FY-2014 average of USD 96.29/b. Kuwait Blend Spot Price FOB averaged at USD 59.3/b during June-15, a decline of USD 1.86/b or 2.6 percent after two consecutive months of strong gains. Kuwait oil closed June-15 at a below monthly average price of USD 58.76/b recording a monthly decline of 0.7 percent as against a 3.1 percent decline during the previous month. Kuwait oil price continued to decline in July-15 falling to USD 54.45/b its lowest point since April- 14.
Meanwhile, European Brent Spot Price FOB averaged at USD 61.48/b during June-15 recording a marginal decline of 0.8 percent or USD 0.49/b. Total world oil demand growth for 2015 was raised by 0.1 mb/d to 1.28 mb/d as compared to the previous month's growth estimate of 1.18 mb/d from the 2014 level to average around 92.61 mb/d. According to the latest monthly US oil demand data, oil demand in the US continued to rise in April- 15. Demand during the first four months of 2015 was higher by 0.4 mb/d led by growing requirement for gasoline (on the back of rising car sales and employment figures), distillate fuel and jet fuel due to the low oil price requirement. Moreover, preliminary data for May-15 and June-15 also pointed to a continued increasing demand for oil in the US. Oil demand also grew in Europe during May-15 especially in Germany, France and the UK on the back of improving economy.
In OECD Asia Pacific, oil consumption is expected to fall in 2015 by 0.12 mb/d due to a decline in demand from Japan. In Other Asia, oil demand in India increased by 0.1 mn/b or 3.0 percent during May-15 and the overall region is expected to see oil demand growth of 0.26 mb/d in 2015. Latin America and the Middle East are also expected to see rising oil demand to the tune of 0.13 mb/d and 0.2 mb/d, respectively. The latest oil monthly report from OPEC also included detailed expectations for 2016. According the report, world oil demand in 2016 is expected to grow at a faster pace than in 2015 rising by 1.34 mb/d from the 2015 levels to average around 93.94 mb/d on the back of improving economic conditions in major global economies that would lead to higher demand for transportation fuels.
This higher demand would be led by non- OECD countries with 1.16 mb/d in total demand, while growth in OECD nations is anticipated to increase by 0.18 mb/d. Within the OECD economies, OECD Americas is expected to see higher demand in 2016 partially offset by a slight decline in demand from OECD Europe and Asia Pacific (a total decline of 0.14 mb/d in these economies). Total non-OPEC supply in 2015 was revised up by 0.22 mb/d as compared to the previous monthly report and is expected to increase by 0.86 mb/d to average at 57.39 mb/d. The increase comes despite a decline in US oil rig count for most of 2015. Rig count in the US declined for 29 consecutive weeks after it picked up in July-15 for two consecutive weeks to 645 rigs.
Oil supply from OECD countries was upgraded from the previous month's estimates and is now estimated to grow by 0.76 mb/d to average at 24.92 mb/d in 2015. Within the OECD, US would see the strongest supply growth of 0.93 mb/d as compared to an increase of 0.81 mb/d for the entire OECD Americas region indicating a decline in supply from Canada that was revised down by 80 tb/d. According the report, there was higherthanexpected supply growth in the US in Q1-15 as well as Q2-15 based on preliminary data. On the other hand, OECD Europe and OECD Asia Pacific are expected to see a decline in supply to the tune of 0.02 mb/d and 0.03 mb/d, respectively. For the non- OPEC countries, supply growth is expected to decline sequentially from Q1-15 to Q3-15 and then rise Q4-15 led by seasonal factors. In 2016, oil supply is expected to increase by 0.30 mb/d to average at 57.69 mb/d as compare to 56.52 mb/d in 2015.
The year is expected to see a decline in supply from the Middle East and Africa (0.06 mb/d each) and to a higher extent from FSU (-0.23 mb/d) on the back of 0.11 mb/d decline in supply from Russia. However, higher supply from the US and Latin America is expected to offset the decline in supply from the aforementioned regions. Total OPEC production during June-2015 witnessed a strong increase of 2.4 percent or 0.744 mb/d to reach at 32.1 mb/d as compared to 31.39 mb/d in May-15. The biggest monthly jump in production was recorded in Iraq that produced at the rate of 4.4 mb/d during the month as compared to 3.8 mb/d during the previous month, an significant increase of 0.567 mb/d or 14.8 percent. However, the IEA pointed out in a report that this surge in production is not permanent and the Iraqi government have already told major oil companies that run the southern oil fields to slow production later during 2015.
Meanwhile, production in Saudi Arabia also increased by strong 0.15 mb/d or 1.5 percent to 10.45 mb/d as the country continues to produce at its highest level in more than 30 years in order to protect its market share from the oil glut in the US. However, Saudi Arabia is also expected to generate significant oil demand in 2016 using a significant share of its oil production for domestic use. The third biggest increase in monthly oil production was recorded in Iran that produced at the rate of 2.85 mb/d during June- 15, an increase of 50 tb/d. However, this increase does not reflect the expected rise in oil production from Iran after it successfully signed the nuclear deal in July-15. On the other hand, production in Kuwait continued to decline for the second consecutive month by 80 tb/d during June-15 to reach 2.75 mb/d due to the drop in production in the divided zone which it shares it with Saudi Arabia. Production drop was also seen in Libya which recorded a second consecutive decline of 15 tb/d as compared to a steeper decline of 115 tb/d during the previous month.
Legal Disclaimer:
MENAFN provides the information “as is” without warranty of any kind. We do not accept any responsibility or liability for the accuracy, content, images, videos, licenses, completeness, legality, or reliability of the information contained in this article. If you have any complaints or copyright issues related to this article, kindly contact the provider above.