Oil Prices Poised To Surge by Q4 2016 on Expected Equilibrium

The International Energy Agency, IEA, has said that oil prices at the global market will reach equilibrium in the third quarter of 2016.

The agency also estimates that by the fourth quarter of 2016, non-Opec supply will have contracted by around 800,000 barrels per day (b/d).

On the other hand, US shale production is expected to account for much of the fall, NBK analysts said.

A more meaningful adjustment to the demand/supply dynamic is likely to come about after oil consumption peaks during the third and fourth quarters of the year and when Non-Organization of Petroleum Exporting Countries (OPEC) production, especially US light tight oil production (shale), records further declines in output, NBK’s update on oil market notes.

US crude production, which plunged by one per cent in 2015, was already down three per cent, or 280,000 b/d, at 8.9 mb/d by 22 April of this year, the US Energy Information Administration (EIA) noted. The increase in production efficiency that has come about despite sizable falls in drilling activity and capital spending by oil firms looks to be finally tapering off.

Rising Iranian output offsets losses in Nigeria to keep Opec production steady in March and OPEC and Russia fail to sign off on a production freeze in Doha.

Overall, OPEC production held steady at 32.2 mb/d for the second consecutive month in March, according to OPEC secondary source data. Output declines in Nigeria and Libya due to supply disruptions and in the UAE as a result of maintenance were broadly offset by output gains in Iran and Iraq. Production in Saudi Arabia and Kuwait was unchanged.