OPEC Oil Market Outlook - bwl.univie.ac.atbwl.univie.ac.at/fileadmin/user_upload/lehrstuhl... · OPEC Oil Market Outlook Prepared by OPEC Secretariat University of Vienna, Austria,

OPEC Oil Market Outlook

Prepared by OPEC Secretariat

University of Vienna, Austria, 21st March 2018

© 2018 Organization of the Petroleum Exporting Countries

Disclaimer

2

“The data, analysis and any other information ('Content') contained in this presentation is for informational purposes and is intended solely for the useof the person(s) to whom it is addressed and may be legally privileged and/or confidential. Any unauthorized use, disclosure or copying of thisPresentation or any parts of it or its attachment(s) by any unintended recipient is strictly prohibited. If you have received this Presentation in error,please immediately return or destroy it. The Content of this Presentation is not intended as a substitute for advice from your business, finance,investment consultant or other professional. Whilst reasonable efforts have been made to ensure the accuracy of the Content of this Presentation, theOPEC Secretariat makes no warranties or representations as to its accuracy, currency or comprehensiveness and assumes no liability orresponsibility for any error or omission and/or for any loss arising in connection with or attributable to any action or decision taken as a result of usingor relying on the Content of this Presentation. Nothing in this Presentation shall be construed as interpreting or modifying any legal obligations underany agreement, treaty, law or other texts; or expressing any legal opinions or having probative legal value in any proceedings. This Presentation maycontain references to material(s) from third parties whose copyright must be acknowledged by obtaining necessary authorization from the copyrightowner(s). The OPEC Secretariat will not be liable or responsible for any unauthorized use of third party material(s). The views expressed in thisPresentation are those of the OPEC Secretariat and do not necessarily reflect the views of individual OPEC Member Countries.

The material contained in this Presentation may not be used and/or reproduced for any purposes without prior written permission from the OPECSecretariat”.


Outline

● Introduction to OPEC

● Short-term market outlook

– Review of the oil market 2014-2016

– Declaration of Cooperation

– Supply/demand balances in the short-term

● Medium- and long-term market outlook

– Key assumptions

– Energy outlook

– Oil outlook

– Key takeaways

3


What is OPEC?

OPEC is a permanent, intergovernmental organization established in Baghdad, Iraq,

10–14 September 1960. The Organization has its headquarters in Vienna, Austria.

The Organization comprises 14 Member Countries:

4


OPEC’s mission

● Coordinate and unify petroleum polices among OPEC Member Countries,

and ensure the stabilization of oil markets in order to secure:

Steady income to producers

Efficient, economic and regular supply of petroleum to consumers

Fair return to investors

5


Short-term outlook

6







– Key assumptions

– Energy outlook

– Oil outlook

– Key takeaways


World oil supply growth outpaced oil demand

growth during 2014-2016, y-o-y change, mb/d

7

From 2014 to 2016, world supply grew by 5.4 mb/d,

while word oil demand increased by 4.3 mb/d.

-2 -1 0 1 2 3 4 5

World oil demand

OPEC crude

OPEC NGLs

Non-OPEC production 3.1 mb/d

2014 2015 2016

1.9 mb/d

0.4 mb/d

4.3 mb/d

5.4 mb/d

Source: OPEC Secretariat.


Rise in OECD commercial inventories, mb

8

2 562

2 706

2 989 3 002

2 853

2 500

2 600

2 700

2 800

2 900

3 000

3 100

2013 2014 2015 2016 2017

427 mb

OECD commercial inventories

at the end of the year

8 mb

386 mb

44

0

100

200

300

400

500

Ok

t 1

4

De

z 1

4

Fe

b 1

5

Ap

r 1

5

Ju

n 1

5

Au

g 1

5

Ok

t 1

5

De

z 1

5

Fe

b 1

6

Ap

r 16

Ju

n 1

6

Au

g 1

6

Okt

16

Dez 1

6

Fe

b 1

7

Ap

r 1

7

Ju

n 1

7

Au

g 1

7

Ok

t 1

7

De

z 1

7

Fe

b 1

8

Difference to 5-year average



OPEC landmark decisions in 2016

9

Algiers Accord

• 170th (Extraordinary) Meeting of the Conference –28 September 2016; Algiers

Vienna Decision

• 171st Meeting of the Conference –30 November 2016; Vienna

• Adjustment of 1.2 mb/d from OPEC-11 countries

Joint Declaration of Cooperation

• OPEC and non-OPEC Ministerial Meeting –10 December 2016; Vienna

• Adjustment of 0.6 mb/d from 11 non-OPEC participating countries


Drop in OECD commercial oil stock since

Declaration of Cooperation by component and region

10Sources: Euroilstock, IEA, METI, OPEC Secretariat and US EIA.

21852

119

-7

337

44

-1000

100200300400

Jan 17 Feb 18

Crude Products Total

By component

-293 mb

235

40

17

-8

85

12

337

44

-1000

100200300400

Jan 17 Jan 18

Americas Asia Pacific Europe OECD Total

By region

-293 mb

138%

111%

0%

20%

40%

60%

80%

100%

120%

140%

160%

Jän

.17

Fe

b.1

7

Mä

r.1

7

Ap

r.1

7

Ma

i.1

7

Ju

n.1

7

Ju

l.17

Au

g.1

7

Se

p.1

7

Ok

t.1

7

No

v.1

7

De

z.1

7

Jän

.18

Fe

b.1

8

Average

Conformity by OPEC and

non-OPEC participants, %

© 2018 Organization of the Petroleum Exporting Countries Sources: CFTC, CME Group, Intercontinental Exchange and OPEC Secretariat.

Crude oil prices improvedDriven by a sizeable stocks draw as well as signs of bullish market sentiment

11

4045505560657075

1 FM 6 FM 11 FM 16 FM

US$/b ICE Brent forward curve

Current

A year ago

6 months ago

25

35

45

55

65

75

Jän

.16

Mä

r.1

6

Ma

i.1

6

Ju

l.1

6

Se

p.1

6

No

v.1

6

Jä

n.1

7

Mä

r.1

7

Ma

i.1

7

Ju

l.1

7

Se

p.1

7

No

v.1

7

Jä

n.1

8

Mä

r.1

8

US$/b ICE Brent

921966

-600

0

600

1 200

1 800

Jän

.16

Mä

r.1

6

Ma

i.1

6

Ju

l.1

6

Se

p.1

6

No

v.1

6

Jän

.17

Mä

r.1

7

Ma

i.1

7

Ju

l.1

7

Se

p.1

7

No

v.1

7

Jän

.18

Mä

r.1

8

‘000 contracts Combined net long positions(ICE Brent & NYMEX WTI)

Long

Short

Net

0

5

10

15

20

Jän

.16

Mä

r.1

6

Ma

i.1

6

Ju

l.1

6

Sep

.16

No

v.1

6

Jän

.17

Mä

r.1

7

Ma

i.1

7

Ju

l.1

7

Se

p.1

7

No

v.1

7

Jän

.18

Mä

r.1

8

Ratio Ratio total long/short


Performance of the world economyGDP change from the previous year, %

12

Note: * 2018 = Forecast.

Sources: OPEC Secretariat, IMF, Markit and Haver Analytics.

2,9

6,5

7,2

1,8

1,9

4,9

1,5

2,2

2,7

2,4

3,8

2,4

6,9

6,4

1,5

1,0

4,8

1,7

2,5

2,3

2,5

3,8

-5,0 -2,0 1,0 4,0 7,0 10,0

OPEC

China

India

Russia

Brazil

Non-OECD

Japan

Euro-zone

US

OECD

World

2017 2018*

GDP growth in selected countries


Oil demand growth remains healthy in 2017-2018,

while non-OPEC supply recovers during the same period

13

1,62 1,60

-0,5

0,0

0,5

1,0

1,5

2,0

2,5

2014 2015 2016 2017 2018

Non-OECD OECD World

World oil demand growthY-o-y change, mb/d

Note: * 2018 = Forecast.


0,87

1,66

-1,0

-0,5

0,0

0,5

1,0

1,5

2,0

2,5

2013 2014 2015 2016 2017 2018*

US Canada Other non-OPEC Total

Non-OPEC supply growthY-o-y change, mb/d


Medium- and long-term outlook

14







– Key assumptions

– Energy outlook

– Oil outlook

– Key takeaways


The world is experiencing an era of demographic

change

15

• Global population to increase by

1.8 billion, reaching almost

9.2 billion in 2040

• India to become the most populated

country in the early 2020s and

population in China peaks in 2028

• Population growth in OECD

supported by migration

• Population growth will decelerate

Population by region (millions)

0,0

0,4

0,8

1,2

1,6

2,0

0

2 000

4 000

6 000

8 000

10 000

2015 2020 2025 2030 2035 2040

%million Non-OECDOECDOECD annual growthNon-OECD annual growth


Economic growth in the long-term

16

• Long-term global GDP growth estimated

at an average rate of 3.5% p.a.

• Long-term economic growth will be

driven by Developing Countries, with

growth in the OECD constrained by

weaker demographics

• The size of the global economy in 2040

is estimated to be 126% that of 2016

• The Reference Case assumes an

evolutionary development of technology

and energy policy in the long-term

Long-term real GDP growth rates (%, 2011 PPP)


Global primary energy demand will increase

by 35%

17

• Energy demand increases by

96 mboed and oil remains dominant

• Gas contributes most to future

demand growth and coal peaks

• Renewables record the fastest

growth rate (6.8%)

World primary energy demand by fuel type

+35%


Energy demand will be driven by

non-OECD countries

18

• Energy demand increases by

96 mboed and oil remains dominant

• Gas contributes most to future

demand growth and coal peaks

• Renewables record the fastest

growth rate (6.8%)

• Growth is concentrated in

non-OECD countries

• India & China are the two largest

contributors to demand growth

Growth in primary energy demand

by region & fuel, 2015–2040


Oil demand in the long-term

19

• In long term, global oil demand

will increase by 15.8 mb/d,

reaching 111.1 mb/d by 2040

• The transportation sector will

remain the main consumer of

oil

• Strong growth is also foreseen

in the petrochemicals sector

• Demand growth decelerates

over the long-term

World oil demand by sector


Total liquids supply, 2016-2040

Liquids supply in the long-term

20

• Non-OPEC liquids supply peaks

at close to 64 mb/d in 2025-2030

• In the long-term, non-OPEC

liquids modestly decline to

60.4 mb/d by 2040

• US tight oil is the most important

contributor to non-OPEC supply,

but peaks after 2025

• Demand for OPEC crude rises

steadily after 2025 to reach

41.4 mb/d by 2040


Oil demand in the Economic Growth sensitivities

21

• Two alternative sensitivities: Higher

GDP growth (HG) and Lower GDP

growth (LG)

• Demand in 2040:

– Reference Case: 111.1 mb/d

– HG: 113.8 mb/d

– LG: 107.5 mb/d

• Overall uncertainty from GDP

growth is in the range of 6 mb/d in

2040

Long-term oil demand (mb/d)


Oil demand in the penetration of EVs Sensitivity

Case

22

• Sensitivity Case: Penetration of

EVs is higher than in the

reference case

• Annual EV sales reach

80 million by 2040

• Oil demand in 2040 is reduced

by 2.5 mb/d compared to the

Reference Case, to

total 108.6 mb/d

• Global oil demand plateaus

around this level in the second

half of the 2030s

Long-term oil demand (mb/d) in the Reference Case and the Sensitivity Case


Oil demand in the efficiency improvements

Sensitivity Case

23

• Accelerated Efficiency (AE)

Case assumes more

aggressive efficiency

improvements

• Overall demand reduction in

the AE case is 3.2 mb/d by

2040, reaching 107.9 mb/d

• Two-thirds of the demand

reduction takes place in DCs

Long-term oil demand (mb/d)


Liquids supply in the Upside/Downside Sensitivities

24

• Based on the Upside Sensitivity,

demand for OPEC crude would be

curbed in the medium-term;

reaching 36.8 mb/d by 2040

• By contrast, in a Downside

Sensitivity Case, demand for

OPEC crude stays relatively flat at

33 mb/d until mid-2020s; then rises

to 45 mb/d by 2040

Supply sensitivities:

impact on demand for OPEC crude


Key takeaways

25

• During 2014 – 2016 global oil supply outpaced world oil demand growth, leading to excess supply

in the market and a strong deterioration in oil prices.

• The Declaration of Cooperation was a necessary response to the growing market imbalance.

• Assuming OPEC and non-OPEC continue at full conformity in the coming months, the market

rebalancing is expected by the end of the year.

• In the long-term, energy demand increases by 35% between 2015 and 2040.

• Global oil demand will increase by 15.8 mb/d, reaching 111.1 mb/d by 2040.

• US tight oil is the most important contributor to non-OPEC supply, but peaks after 2025, raising the

need for more OPEC crude.

• Economic developments, penetration of EVs and energy efficiency improvements constitute

critical uncertainties for future oil demand growth.

www.opec.org

Thank you

A comprehensive interactive version of the

WOO is available at www.opec.org

University of Vienna, Austria, 21st March 2018

26

http://www.opec.org/

Documents

OPEC Oil Market Outlook - bwl.univie.ac.atbwl.univie.ac.at/fileadmin/user_upload/lehrstuhl... · OPEC Oil Market Outlook Prepared by OPEC Secretariat University of Vienna, Austria,