Brent forward curve is too low, Rystad says
STAVANGER, Norway -- The global oil market is tightening slowly from a peak supply and demand imbalance in second-quarter 2015, according to Rystad Energy’s latest research. The June Global Oil Market Trends Report sees insufficient oil demand growth to prevent further counter-seasonal stock building in the third and fourth quarters.
“We have a neutral view on oil prices towards the end of the year, but see some downside risk towards the end of the third quarter when demand for crude and key products comes off its summer-peak,” Rystad’s Bjørnar Tonhaugen, V.P. of oil and gas markets, said.
Non-OPEC liquids supply growth grinds to a halt in 2016 with only 200,000 bpd of additions, while it is expected that global demand will grow 1.1 MMbpd next year. The supply overhang will persist into the first half of next year, before oil and product inventories will gradually start to fall globally in the second half of 2016.
Key to the supply outlook is the resiliency of U.S. shale activity. Most North American shale plays now have average WTI breakeven oil prices of just below $50/bbl.
“We have lowered our breakeven oil price curve, owing to cost compression and efficiency gains observed in the North American shale industry. Nevertheless, the cost curve for shale is not flat, but steep, as marginal plays still require prices above $80-90/bbl to make a return,” Tonhaugen said.
To meet the future demand for oil towards 2020, Rystad Energy’s field-by-field analysis continues to support oil prices higher than where current crude futures are trading post-2016. “We are bullish on oil from 2017, even though we expect key OPEC producers to continue to focus on market share."
