1. No category

Oil market outlook
Edward Bell
Commodity Analyst
+971 (0) 4 230 7701
[email protected]
April 2015
1
Is the worst behind us?
•
•
•
•
Brent futures prices are up 14% ytd and have
been closing in on USD70/b.
Remember: forecasts were for lows of
USD20-30/b in end of Q1/Q2.
110.00
100.00
90.00
ENBD View: gradual climb up to USD70 by
end of 2015 and into 2016
Brent 2015: USD 61/b.
•
Brent 2016: USD 70/b
130.00
120.00
Futures market has a gradual recovery in
2015-16 but current future curve may be
getting ahead of itself
•
A recovery in sight?
80.00
70.00
60.00
2015
q1
q2
qq3
q4
2016q
1
q2
q3
q4
50.00
Brent:
USD/b
55.16
58.00.
63.00
67.50
70.00
68.00
70.00
72.00
40.00
WTI:
USD/b
48.63
48.50
54.50
59.00
61.20
58.50
60.00
60.00
30.00
WTI: USD/b
Brent: USD/b
WTI Futures: USD/b
Brent Futures: USD/b
Some headwinds in the way of sustained recovery
•
Market surplus to persist in 2015-16 but will
tighten from 2014 oversupply
•
Demand growth limited: just 1-1.2m b/d in
2015-16
•
Demand remains concentrated in nonOECD/emerging markets but some pockets of
growth in US and Europe
Global market balance
100.00
1.50
1.00
95.00
•
•
•
Supply growth to slow sharply: from near 2m
b/d in 2014 to average of 0.8m b/d if OPEC
production in line with 2014 numbers
US output to slow significantly; Canada now
faces uncertain production outlook too
But OPEC producing at average pace of 2015
ytd, then market surplus blows out again
▪ Saudi Arabia producing over 10m b/d in Mar-Apr
▪ OPEC total 1.3m b/d > 30m b/d target
0.50
-
90.00
(0.50)
(1.00)
85.00
(1.50)
(2.00)
80.00
(2.50)
75.00
(3.00)
2007
2010
2013
2016
Global demand: m b/d
Global supply (OPEC at steady 2014 output): m b/d
Market balance: m b/d
Market balance (OPEC at current output levels): m b/d
Source: IEA, Bloomberg
OPEC slack means gradual—not sudden—price moves
•
OPEC currently producing around 83% of
total capacity of around 37m b/d
Share of capacity vs price move (yoy)
100.00
2008 price surge
80.00
•
Normally correlates with small, bi-directional
movements in prices
60.00
•
•
Tighter market/less spare capacity sees
bigger gains
But catalyst would be demand driven
% change in price
40.00
20.00
75.00
80.00
85.00
90.00
(20.00)
•
US ‘claim’ on OPEC exports has slumped:
from 2007 high to current imports fell +3m b/d
(40.00)
Where we are now
(60.00)
•
China next great hope: OPEC imports in
same time not quite +2.5m b/d
(80.00)
OPEC production/capacity (%, 2007-15
95.00
Where does that leave Gulf oil producers?
Budget balance: % of GDP
•
Fiscal positions will tighten across the region
40.0
30.0
•
All governments below breakeven oil prices
20.0
10.0
•
Spending to slump across the region
0.0
•
Local rates showing some tightening (but non-Cbank
assets remain high so can access finance in crunch)
(10.0)
(20.0)
2010
•
How do you make a decision when prices are volatile?
2012
2014f
2016f
Saudi Arabia
UAE
Qatar
Kuwait
Oman
Bahrain
Breakeven oil prices: USD/b
150
Change in government spending (% yoy)
30.0
100
25.0
20.0
15.0
50
10.0
5.0
0.0
0
(5.0)
2013
Saudi Arabia
Kuwait
Bahrain
2014e
2015f
2016f
UAE
Oman
Brent: average USD/b
Source: Emirates NBD
(10.0)
(15.0)
2012
Saudi Arabia
2013e
UAE
Kuwait
2014e
Qatar
Oman
2015f
Bahrain
Where to look?
•
Focus for the downstream sector can
be on local markets
GCC fuel balances
1,400
•
MENA oil demand to grow nearly 2x as
fast as global demand: among the
fastest in non-OECD
1,200
1,000
800
600
•
Regional refining output doesn’t match
regional fuel demands
400
200
•
Refining/petrochemicals add value to
petroleum value chain, bring
employment opportunities
0
(200)
(400)
Gasoline
Kerosene
Diesel
Source: JODI, Emirates NBD
Fuel oil
Jan2015
Oct2014
Jul2014
Apr2014
Jan2014
Oct2013
Jul2013
Apr2013
Jan2013
Oct2012
Jul2012
Feedstock costs remain competitive
even with low US natgas
Apr2012
•
Jan2012
(600)
Thank you
www.emiratesnbdresearch.com
April 2015
7