Saudi crude production to hit 10.3m barrels per day in 2016

Jadwa Investment expects Saudi Arabia’s 2016 crude oil production to average at 10.3 million barrels per day, slightly up from its previous forecast of 10.2 million barrels per day.

Saudi oil production hit record levels during the third quarter of 2016, with the Kingdom’s average output for the quarter at 10.6 million barrels per day despite a fall in domestic demand, Jadwa stated in its quarterly oil market update released Sunday. 
“We see this rise coming about due to higher year-on-year crude oil and refined product exports as Saudi Arabia bids to maintain global market share,” added the Jadwa economists.
According to the update, Brent oil prices were virtually unchanged in Q3 2016, quarter on quarter, despite rising sharply after OPEC announced, at the end of September, it would cut production. 
Although oil prices were volatile during Q3 2016, they showed little change from the previous quarter, at $45 per barrel as oil markets remained well supplied in the face of modest demand growth. 
OPEC’s decision to announce, but not to implement, a cut in production immediately sent Brent oil prices up 6 percent. 
Despite the announcement, the deal remains fragile and is fraught with numerous obstacles prior to its final agreement in November. 
“There is also the question of whether cutting production would actually be beneficial for OPEC producers, since, in our view, it could encourage a rise in production for other producers, none more so than in the US, where oil rig counts have rebounded and production forecasts have been revised upwards, even prior to OPEC’s announcement,” Jadwa researchers stated. 
Growth in global demand in 2016 is expected to remain below recent historical levels, with even lower growth expected in 2017, according to the Jadwa report. 
It said that the latest OPEC data points to year-on-year oil demand growth of 1.3 million barrels per day (mbpd) in 2016 and 1.2 mbpd in 2017, both below the average of 1.4 mbpd in the five years between 2010-15. 
More strikingly, US, India and China are expected to provide 63 percent of total oil demand growth in 2016, with their collective share declining to 50 percent in 2017. 
Meanwhile, Asia-Pacific and Latin America regions are both expected to see a fall in yearly oil demand in 2016, with Asia-Pacific continuing to decline in 2017 due to falling Japanese oil demand.
In the US (21 percent of global oil demand), record low retail pump prices have spurred gasoline demand, which makes up a major component of total US liquid consumption, at 48 percent. 
Provisional data for Q3 2016 shows record demand for gasoline during the summer driving season. 
“Looking ahead into Q4 2016, gasoline demand will fall slightly, quarter-on-quarter, but remain higher than previous years. The US Energy Information Administration’s (EIA) forecasts point to lower 2017 gasoline demand, but only marginally,” the report added. 
It said that seasonal factors also helped push up Q3 2016 oil demand in Europe (15 percent of global oil demand). Higher consumption of road transportation fuels, notably diesel, and an improvement in vehicle sales resulted in higher year-on-year demand. 
Looking ahead, the report said that Q4 2016 demand is expected to hold up, but OPEC forecasts point to 2017 demand being marginally lower, year-on-year, due to higher oil taxation and fuel substitution.
So far, there seems to be no material effect on oil demand after the UK’s decision to leave the European Union (EU), back in June. However, following the UK prime minister’s recent announcement that Britain’s formal exit from the EU will begin in Q1 2017, downward risks to Europe’s oil demand remain, especially so if the region’s economy is thrown into a recession as a consequence.

Source: Arab News