OPEC Monthly Oil Market Report – August 2017
World Economic Prospects
growth has gained momentum and its dynamic is reflecting general improvements across the
globe. Global growth is forecast at 3.4% for both 2017 and 2018, compared to 3.0% in 2016 (
increasing by only 1.7% in 2016, OECD GDP growth has improved and is expected at 2.0% in both 2017 and
2018. The major emerging economies are also either holding up well at a high growth rate (India), performing
better than expected (China) or are recovering from recession (Russia and Brazil). With the ongoing growth
momentum and an expected continued dynamic in 2H17, there is still some room to the upside. At the same
time, challenges remain and are mainly related to global political developments and upcoming monetary policy
decisions in the US and the Euro-zone. Moreover, continuing stability in the oil market remains a key-determinant
for global growth.
Graph 1: World economic growth in 2017 and 2018
Graph 2: OECD commercial stocks,
difference to 5-year average
, the US economy is rebounding from relatively low growth in 2016 of only 1.5%. A renewed
increase in investments in the energy sector along with rising domestic consumption and improving exports are
leading growth to 2.1% in 2017 and 2.2% in 2018. Planned tax-reforms could lead to higher growth, but as
political uncertainties remain, downside risk is equally pronounced. In the Euro-zone, growth has been relatively
stable over the past quarters and better than expected. GDP growth is now forecast at 2.0% for 2017 and 1.8%
for 2018, following 1.7% growth in 2016. Supported by the ECB’s ongoing accommodative monetary policy and
having overcome some political uncertainty, growth in the Euro-zone still has room to the upside, considering the
expected improvement in the labor market given the need to address the high unemployment rate. Japan is
expected to show higher growth of 1.4% in 2017, compared to 1.0% last year, and growth in 2018 is forecast at
1.1%. Structural reforms and ongoing monetary stimulus together with fiscal support all provide the basis for a
gradually improving economy, while the upside is considered to be limited.
, China experienced better-than-expected growth in the first half of 2017, supported by
an ongoing buoyant property market. This will result in growth of 6.7% in 2017, the same level as in 2016.
However, risks from rising debt and overcapacity remain. Hence, growth in 2018 is forecast at a slightly lower
rate of 6.3%. India is holding up at a high growth level and, while the economy has to digest some of the
consequences of economic structural reforms – such as the introduction of the Goods and Services Tax (GST) –
growth is still forecast at a considerable level of 7.0% for 2017, below last year’s growth of 7.9%. Growth in 2018
is forecast to rebound to 7.5%. Meanwhile, Brazil and Russia are forecast to rebound from a two-year’s recession
to growth of 0.5% and 1.2% in 2017, respectively, supported by recovering commodity prices and an improving
domestic consumer base. Uncertainties with regards to both economies remain significant, from the domestic
political challenges in the case of Brazil and from both multilateral and more recent unilateral sanctions in the
case of Russia. These developments may impact 2018 growth, which is now forecast at 1.5% for Brazil and 1.4%
in the case of Russia.
A gradual normalization of
in the major OECD economies is still the most likely scenario,
given that inflation remains relatively low. However, the recent rise in the value of the euro to the US dollar has
reflected some uncertainty about future monetary policies. While the ECB may normalize its monetary policies
quicker than anticipated, the US Fed is likely to slow-down the pace of its monetary tightening. Such monetary
policies remain influential to the oil market. Capital flows have been an important source funding economic
activity in the emerging economies, supporting oil demand. On the supply side, low interest rates have been an
important driver of investments for unconventional resources, mainly in the US. The low cost of holding
inventories has also somewhat slowed the drawdown in excess oil stocks, although OECD inventories have still
seen an 87 mb decline since January 2017 compared to the five-year average (
All in all, the improvement in economic activities in 2H17
bring the expectation that not only OECD countries but
also emerging as well as developing countries more broadly will be better off by the end of the year. Moreover,
some recent positive geopolitical developments give hope that reduced tensions in some regions can add to oil
demand growth and support developments in these economies. Taken together, this will allow the global
economy to enter the coming year with a firm basis to support better-than-projected growth in 2018.
Source: OPEC Secretariat.
May 17 Jun 17
Source: OPEC Secretariat.
∆ Jun 17 - Jan 17