INTERACTIVE: Uncertainties over OPEC deal weigh on crude oil recovery in November

LONDON (ICIS)–The announcement on 30 November by OPEC that a deal to cut production had been reached came a little too late as the OPEC Reference Basket fell by 10% in November to stand at $43.22/bbl, according to the cartel’s latest Monthly Oil Market Report (MOMR) on Wednesday.

Having risen steadily in the months prior to this report, uncertainty about the OPEC deal and whether it would come to fruition led to volatile crude oil prices throughout November.

ICE Brent fell by $4.31 (8.4%) to stand at $47.08/bbl, while NYMEX WTI also fell, dropping by $4.18 (8.4%).

This month’s report said that world oil demand is now expected to increase by 1.24m bbl/day in 2016 to average 94.41m bbl/day, thanks to “better-than-expected data from OECD [Organisation for Economic Co-operation and Development] Europe”.

In 2017, oil demand is expected to increase by 0.2m bbl/day in OECD Americas and by 0.01m bbl/day in OECD Europe, however, in OECD Asia, oil demand is projected to reduce by 0.06m bbl/day.

Overall, OPEC’s expectations for world oil demand in 2017 is a 1.15m-bbl/day rise in demand, leading to total world oil consumption of 95.56m bbl/day, which is unchanged from the November MOMR.

In terms of supply, non-OPEC supply growth in 2017 has been revised up slightly to now stand at 0.3m bbl/day meaning an expected average of 56.5m bbl/day. The report said that OPEC crude oil production increased by 0.15m bbl/day in November.

OPEC supply is expected to decline following the cartel’s decision on 30 November to implement a new production target of 32.5m bbl/day effective 1 January 2017.

OPEC expects that the world economy will expand by 2.9% in 2016 and by 3.1% in 2017, both of which are in line with its expectations in recent monthly reports.

“Numerous uncertainties for global economic growth remain,” said the cartel.

“Among these are policy issues across the globe, which bear considerable weight, as well as monetary policy decisions, which remain important in the near-term.

“It is expected that the US Federal Reserve will raise interest rates in December, while the European Central Bank, the Bank of Japan, the band of England and the People’s Bank of China will all maintain more accommodative stances.”

Additional reporting by Sophie Udubasceanu