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Monthly Oil Market Report

2 3 ( &

11 May 2017

Feature article:

Non-OPEC oil supply development








Productmarketsand refineryoperations


Oil trade


















OPEC bulletin 5–7/17



Non-OPEC oil supply developments

show recent increase

Although non-OPEC supply levels decreased sharply

in 2016, preliminary data for the first few months of

2017 indicate an output increase, according to the

OPEC Secretariat in Vienna. However, numerous fac-

tors may mitigate this during rest of the year.

According to its

MonthlyOilMarket Report (MOMR)

for May, OPEC said low oil prices in 2016 had led to a

reduction of around 23 per cent in global E&P invest-

ments compared to 2015, alongwith a deferral of sev-

eral upstreamprojects. “Particularly inNorthAmerica,

E&P spending fell by around 38 per cent, as observed

in the 48 per cent y-o-y decline in US rig counts, as

well as lower well completions,” the report said.

As a result, the report noted, “non-OPEC oil sup-

ply decreased sharply in 2016, contracting by 0.7

million barrels/day from the high growth of 2.3m b/d

in 2014 and 1.5m b/d in 2015.” Non-OPEC supply in

2016 also saw contractions in OECD Americas (0.5m

b/d), China (0.3mb/d), and Latin America (0.1mb/d),

while in the FSU an increase (0.2m b/d) was seen,

driven mainly by robust output from Russia.

“The oil supply contraction in OECD Americas in

2016wasmainly due to US onshore crude oil output,”

the report explained. This includes “tight oil, along

with annual declines in Mexico and outages in the

Canadian oil sands.” Meanwhile, US oil production

showed a y-o-y decline of 0.4m b/d in 2016 — “but

this trend has reversed so far in 2017, primarily due

to higher oil prices together with cost cuts.”

Looking ahead, the report suggested that non-

OPEC supply performance in 2017 “will depend on

many factors, including the world economy; higher

spending by oil companies, particularly in North

America; new economic and energy policies in major

economies, especially the US; and the timely imple-

mentation of oil projects in Canada and Brazil, as

well as oil price developments and to some extent


In fact, it noted that many US oil and gas

companies have already stepped

up activities in 2017 as they have

started to increase their spend-

ing amid an incipient recovery in

oil prices. “As a result, US crude

oil production surpassed 9m

b/d in February 2017, about

0.5m b/d higher than the low

seen in September 2016,”

the report said. “For 2017,

total US liquids production

is forecast to increase by

0.82m b/d with crude oil contrib-

uting 0.6m b/d.”

Taking a closer look at the first two months at the

beginning of 2017, the report said that “tight crude

output increased by 0.10mb/d fromDecember 2016,

while NGLs output rose by 0.26m b/d over the same


Additionally, with the pick-up in drilling activities,

as well as increased cash flows, it noted that “US tight

crude output is expected to rise rapidly and increase

by 0.6m b/d in 2017.” Overall, it said non-OPEC sup-

ply in 2017 is expected to increase by 0.95m b/d.

In addition to supply growth in the US, the report

said “higher oil production is expected in Canada

(0.22mb/d) and Brazil (0.21mb/d), while Mexico and

China are forecast to see the largest contractions.”

With regard to global supply levels, the report

noted that “[a] large part of the excess supply over-

hang contained in floating storage has been reduced

and the improvement in the world economy should

help support oil demand.”

However, it cautioned that “continued rebalanc-

ing in the oil market by year-end will require the col-

lective efforts of all oil producers to increase market


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