The Brent forward curve is too low

June 23, 2015

The global oil market is tightening slowly from a peak supply and demand imbalance in Q2 2015, according to Rystad Energy’s latest research. The June Global Oil Market Trends Report sees insufficient oil demand growth to prevent further counter-seasonal stock building in Q3 and Q4 2015.

“We have a neutral view on oil prices towards the end of the year, but see some downside risk towards the end of Q3 when demand for crude and key products comes off its summer-peak”, says Bjørnar Tonhaugen, VP Oil and Gas Markets.

Non-OPEC liquids supply growth grinds to a halt in 2016 with only 200 thousand barrels per day of additions, while it is expected that global demand will grow 1.1 million barrels per day next year. The supply overhang will persist into the first half of next year, before oil and product inventories will gradually start to fall globally in the second half of 2016.

Key to the supply outlook is the resiliency of US shale activity. Most North American shale plays now have average WTI breakeven oil prices of just below USD 50/bbl. “We have lowered our breakeven oil price curve, owing to cost compression and efficiency gains observed in the North American shale industry. Nevertheless, the cost curve for shale is not flat, but steep, as marginal plays still require prices above 80-90 USD/bbl to make a return,” says Bjørnar Tonhaugen.

To meet the future demand for oil towards 2020, Rystad Energy’s field-by-field analysis continues to support oil prices higher than where current crude futures are trading post-2016. “We are bullish on oil from 2017, even though we expect key OPEC producers to continue to focus on market share."

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Contacts

Bjørnar Tonhaugen, VP Oil & Gas Markets
Mobile: +47 46 66 25 09
bjornar.tonhaugen@rystadenergy.com

Julia Weiss, VP Marketing
Mobile: +47 48 29 87 61
julia.weiss@rystadenergy.com

 

About Rystad Energy

Rystad Energy is an independent oil and gas consulting services and business intelligence data firm offering global databases, strategy consulting and research products.

Rystad Energy’s headquarters are located in Oslo, Norway, with additional research teams in India. Further presence has been established in the UK (London), USA (New York & Houston), Russia (Moscow), Africa as well as South East Asia.


Global Oil Market Trends Report (OMTReport) provides consistent and up-to-date representation and analysis of global oil supply, demand and market trends with short and medium-term forecasts. OMTReport relies not only on oil market fundamentals but also on individual company research and costs of supply on a field-by-field basis.