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Monthly Oil Market Report


10 August 2017

Feature article:

Review of the world economic development








Productmarketsand refineryoperations


Oil trade




















OPEC bulletin 8–9/17

In the August 2017

Monthly Oil Market Report (MOMR)

, OPEC reported

that world economic growth was gaining momentum, reflecting gen-

eral improvements across the globe.



feature story, entitled

World economic prospects,

forecasts global growth at 3.4 per cent for both 2017 and 2018, up

from3.0 per cent in 2016. After increasing by only 1.7 per cent in 2016,

OECD GDP growth is now expected at 2.0 per cent in both 2017 and


According to the report, the major emerging economies are also

holding up well with high growth rates seen in India and better-than-

expected performances in China, while Russia and Brazil continue to

recover from recession.

The report sees this general upward trend continuing in the sec-

ond half of the year with a few hurdles along the way.

“With the ongoing growth momentum and an expected continued

dynamic in 2H17, there is still some room to the upside,” the report

explained. “At the same time, challenges remain and aremainly related

to global political developments and upcoming monetary policy deci-

sions in the US and the Euro-zone. Moreover, continuing stability in

the oil market remains a key determinant for global growth.”

In terms of OECD expansion, the report noted that the US econ-

omy was rebounding from a relatively low growth rate of only 1.5 per

cent in 2016.

“A renewed increase in energy sector investment along with ris-

ing domestic consumption and improving exports were expected to

raise growth projections to 2.1 per cent in 2017 and 2.2 per cent in

2018,” the report said. “Planned tax reforms could lead to higher

growth, but as political uncertainties remain, the downside risk is

equally pronounced.”

In terms of the Euro-zone, the report noted that growth had

been relatively stable over the previous quarters and was better than

expected, adding that GDP growth was now forecast at 2.0 per cent

for 2017 and 1.8 per cent for 2018, up from the 1.7 per cent growth

rate seen in 2016.

“Supported by the ECB’s ongoing accommodativemonetary policy

and having overcome some political uncertainty, growth in the Euro-

zone still has room to the upside, considering the expected improve-

ment in the labour market given the need to address the high unem-

ployment rate,” the report explained.

The report said Japan is expected to experience higher growth of

1.4 per cent in 2017, up from 1.0 per cent last year, while growth in

2018 is forecast at 1.1 per cent.

“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,” the report added.

Looking at the emerging markets, the


reported that China

had seen better-than-expected growth in the first half of 2017, boosted

by an ongoing robust property market, which is expected to result in

growth of 6.7 per cent in 2017, the same level as in 2016. With risks

from rising debt and overcapacity still in the

picture, the report noted that growth in 2018

would be forecast at a slightly lower rate of

6.3 per cent.

Even though India’s economy contin-

ues to absorb some of the consequences

of economic structural reforms, such as

the introduction of the Goods and Services Tax

(GST), the report forecasts a solid growth rate of 7.0 per cent for

2017, which is down from last year’s growth of 7.9 per cent. Growth

in 2018, however, is forecast to rebound to 7.5 per cent.

Brazil and Russia continue to rebound from a two-year recession

and, according to the


, are expected to achieve growth of 0.5 per

cent and 1.2 per cent in 2017, respectively, with support coming from

recovering commodity prices and an improving domestic consumer

base. The report noted, however, that uncertainties remain for both

economies, including domestic political challenges for Brazil as well

as multilateral, and more recently, unilateral sanctions in the case of

Russia. These developments may impact 2018 growth, which is cur-

rently forecast at 1.5 per cent for Brazil and 1.4 per cent for Russia.

The report also looked at global monetary policies and concluded

that a gradual normalization of these policies in themajor OECD econ-

omies was likely given that inflation was still relatively low. It added,

however, that the recent rise in the value of the euro to the US dollar

may present some uncertainty in regards to 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 mone-

tary tightening,” the report explained. “Suchmonetary policies remain

influential to the oil market. Capital flows have been an important

source for funding economic activity in the emerging economies, sup-

porting oil demand. On the supply side, low interest rates have been

an important driver of investments for unconventional resources,

mainly in the US.”

The report also noted that although the low cost of holding inven-

tories had slowed down slightly the drawdown in excess oil stocks,

OECD inventories had still seen an 87m b decline since January 2017

compared to the five-year average.

A boost in overall world economic activity during the second half

of the year is forecast to provide fertile ground for solid growth in


“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,” the report forecasted. “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-pro-

jected growth in 2018.”

World economic prospects for

2017–18 look positive