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Monthly Oil Market Report

2 3 ( &

14 March 2017

Feature article:

Assessment of the global economy

Oilmarkethighlights

Featurearticle

Crudeoilpricemovements

Commoditymarkets

Worldeconomy

Worldoildemand

Worldoilsupply

Productmarketsand refineryoperations

Tankermarket

Oil trade

Stockmovements

Balanceofsupplyanddemand

Monthlyendnotes

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105

OPEC bulletin 3–4/17

March

2017

Oil market rebalancing set to

further enhance petroleum industry

The rebalancing of the international oil market, driven by

the recent successful ‘Declaration of Cooperation’ reached

by OPEC and a group of non-OPEC producing countries, is

likely to further enhance the global oil industry, according

to the OPEC Secretariat in Vienna.

In its

Monthly Oil Market Report (MOMR)

for March, it

said the ‘Declaration’, reached in December last year and

which came into effect on January 1, 2017, would lead to

even more global economic growth and hence higher oil

demand growth in 2017.

Under the terms of the decision made on December 10

in the Austrian capital, OPEC and the 11 non-OPEC produc-

ing countries have agreed to adjust their crude oil produc-

tion by a total of around 1.8 million barrels/day for the first

six months of 2017.

In a feature article on the assessment of the global

economy, the

MOMR

said that improvements in the world

economy that had started in the second half of 2016 were

likely to continue in 2017.

After estimated growth of three per cent in 2016, global

economic growth was expected to pick up in 2017 to reach

3.2 per cent.

The report noted that support was seen coming from

the OECD group of countries with growth of 1.9 per cent in

2017, compared to 1.7 per cent in the previous year.

GDP growth in China and India were forecast to slightly

decelerate, yet still remain strong.

“The stabilization of oil markets seen since the OPEC/

non-OPEC ‘Declaration of Cooperation’ has helped to sup-

port upstream capex spending and improve oil producers’

income, adding to global economic growth,” the

MOMR

maintained.

It said that higher-than-anticipated economic growth

may come from the United States and the Euro-zone, as

well as Japan to some extent.

Upside potential also existed in the emerging econo-

mies of China, India, Brazil and Russia.

However, it added that, at the same time, political and

economic uncertainties could hamper the global economy

from further and faster improvements, including upcom-

ing elections in major European economies, developments

regarding Brexit, and fiscal, monetary and trade policies.

The

MOMR

observed that, in the US, labour market

improvements had continued to support the economy and

significantly lift consumer sentiment.

At the same time, industrial production had started to

pick up, while being supported by the recovery in oil prices.

In recent months, US domestic

consumption had turned out to be par-

ticularly supportive for the economy

and the return of investments in the

oil industry was expected.

“However, uncertainties regard-

ing both the consequences of new

economic programmes, as well as

the impact of the normalization

ofmonetary policies remain,” the

report affirmed.

In this respect, said the

MOMR

, upcoming budgetary

discussions, in combination

with the expiry of the debt-

ceiling suspension in mid-March,

would need close monitoring.

In the Euro-zone, the economic recovery continued,

supported by domestic improvements, but also by the

European Central Bank’s extraordinary monetary stimulus.

The

MOMR

said that the ongoing weakness in the bank-

ing sector — including continuing sovereign debt-related

issues in Greece — may weigh on the region’s near-term

growth.

Meanwhile, Japan’s government-led stimulus had lifted

momentum, with most economic indicators pointing to the

upside. As a result, the country’s GDP was expected to rise

marginally in 2017.

The

MOMR

said that, within the emerging and develop-

ing countries, growth trends were likely to vary once again

in 2017.

Brazil and Russia were expected to recover at different

levels from two years of recession, partly due to the lower

commodity prices.

“Despite a somewhat slowing momentum, GDP growth

in both China and India is holding up well,” it stated.

The report added that the rise in commodity prices had

provided vital support to the economies of several devel-

oping countries.

“Meanwhile, the increase in commodity prices has

positively lifted inflation in the advanced economies to

healthier levels, providing major central banks some room

to normalize their monetary policies.

“Global trade is also likely to benefit from more stable

commodity prices in 2017,” the

MOMR

maintained.

M a r k e t R e v i e w