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Monthly Oil Market Report

2 3 ( &

13 June 2017

Feature article:

World oil market prospects for the second half of 2017








Productmarketsand refineryoperations


Oil trade


















OPEC bulletin 5–7/17

The world GDP forecast for 2017 is a good indicator of the

positive sentiment that is currently boosting the market, a

feeling which is expected to continue into the second half

of the year, according to the OPEC Secretariat in Vienna.

According to its

Monthly Oil Market Report (MOMR)

for June, the underlying global dynamic is continuing

to improve overall, despite some political challenges.

Additionally, oil prices in particular will continue to be a

key determinant for the wellbeing of most producer econ-

omies and thus will continue to influence global growth.

“The gradual recovery of theworld economy continues

and stronger-than-anticipated growth in 1Q17 has lifted

the world GDP growth forecast for 2017 to 3.4 per cent,

up from the 3.1 per cent growth seen in 2016,” according

to the June



Political uncertainties, including the recent general

election in the UK, seemunlikely to hinder broadly healthy

OECDgrowth in the second half of the year. Emerging econ-

omies show more variability, with the pace of growth in

China expected to continue to slow gradually in the sec-

ond half of the year. This is counter-balanced by India,

where momentum is seen to be picking up as the nega-

tive impact of demonetization fades. Russia and Brazil are

also expected to performwell, with some uncertainties at


Monetary policy will remain a focus as the US Federal

Reserve may raise interest rates further in 2H17, which

could create some capital outflows from the emerging


Global oil demand should improve in 2H17, with a 2m

b/d increase in total consumption to reach 97.4m b/d,

slightly down from the 95.4m b/d seen in 1H17. OECD

demand will pick up somewhat by about 0.2m b/d y-o-y,

with OECD Americas being the largest contributor to this

growth, thanks to the driving season providing a boost in

demand. In OECD Europe, demand will rise slightly, while

in OECD Pacific it will contract, though this decline will

be moderated by strong growth in South Korea.

In non-OECD, oil demand is expected to grow by

around 1.0m b/d y-o-y for the second half of 2017. This is

expected to come largely from India as it recovers from

demonetization, though China will also contribute to

demand growth due to developments

in the petrochemical industry and the

transportation sector.

Meanwhile, non-OPEC supply

will increase by about 0.5m b/d in

the second half of the year over

the first half to average 58.4mb/d,

with theUS being themain driver

behind this growth. The US will

contribute 0.76m b/d, while

Brazil and Canada will grow

by 0.12 and0.06, respectively.

However, this will be some-

what offset by lower produc-

tion from Russia, down by 0.13m b/d, China

and Indonesia, each falling by 0.06m b/d and Norway,

which will drop by 0.05m b/d.

The OECD is expected to grow by 0.71m b/d in 2H17,

which will broadly offset declines in the former Soviet

Union and elsewhere of 0.18m b/d.

OECD commercial oil inventories have seen a decline

in the first four months of the year, down to 251m b from

339m b compared with the five-year average. This is pre-

sumed to continue in the second half of the year with help

of ongoing production adjustments by OPEC and partici-

pating non-OPEC producing countries.

“These trends, along with the steady decline in oil in

floating storage, indicate that the rebalancing of the mar-

ket is underway, but at a slower pace, given the changes in

fundamentals since December, especially the shift in US

supply from an expected contraction to positive growth,”

stated the June



Due to these developments, OPEC and participating

non-OPEC countries chose on May 25 at the conclusion

of the 172


Meeting of the Conference and the 2



and non-OPEC Ministerial Meeting to extend production

adjustments for a further ninemonths until March 2018, in

recognition of the continuing need for cooperation among

oil exporting countries in order to achieve lasting stability

in the oil market.

World oil market prospects favorable

for the second half of 2017