KUWAIT, Dec 16 (KUNA) -- Oil prices rebounded from their early November
lows as markets digested the Iranian nuclear deal and responded to a flow of
positive global economic data, according to a National Bank of Kuwait (NBK)
With non-OPEC supplies expected to rise strongly in 2014, OPEC may still
need to cut output in order to maintain prices close to USD 100, it said
An oil price of between USD 103 and USD 105 pb in FY13/14 could generate a
budget surplus for Kuwait of around KD 12 bn this fiscal year, equivalent to
around 24 percent of GDP, the report showed.
After dipping sharply in early November, crude oil prices rallied through
the rest of the month, regaining all of the previously lost ground. The price
of Kuwait Export Crude (KEC) rose from a low of USD 101 per barrel (pb) in
early November to USD 107 a month later, USD 3 above its November average.
Brent crude prices also rose from a low of USD 103 in early November to USD
114 - well above the trading range for most of the year. The price of West
Texas Intermediate (WTI) - the main US crude benchmark - once again bucked the
trend, failing to see any sort of bounce until the first few days of December.
At a price of USD 92 WTI's discount to Brent reached USD 20 in late November,
its highest since March.
The rise in crude prices came as markets digested the implications of the
late November deal between the international community and Iran over the
latter's nuclear program. The deal suspends any tightening of current oil
sanctions, and paves the way for a possible return of up to 1 million barrels
per day (mbpd) of Iranian oil exports to the global market next year, itsaid.
However, although the deal is bearish for oil prices over the long-term, it
releases little or no extra oil on the market for the next few months, and
there is no guarantee that a final agreement will be reached next May.
Meanwhile, a slew of encouraging economic data - particularly in developed
economies - has boosted the prospect of global oil demand soaking-up the large
expected rise in non-OPEC supply next year.
The International Energy Agency (IEA) has slightly reduced its forecasts
for next year in line with lower economic growth expectations in the US and
China, seeing demand growing by 1.1 mbpd in 2014, or 1.2 percent, up from 1
mbpd in 2013.
Crude output of the OPEC-11 (excluding Iraq) fell for the third consecutive
month, plunging by 604,000 bpd to 28.1 mbpd in October - according to data
provided by 'direct communication' between OPEC and national sources, it added.
This came on the back of steep declines in Saudi Arabia (370,000 bpd) and
Iran (317,000 bpd). Saudi output was reduced to below 10 mbpd for the first
time in 4 months as a result of the seasonal wind-down in crude demand at
domestic power plants. Kuwait and the UAE also cut output slightly at the end
of the hot summer months, with field maintenance in Kuwait likely to continue
to affect output through mid-November.
Iranian production reportedly fell to 3.2 mbpd in October, though secondary
sources cite lower output levels of around 2.7 mbpd. Further large declines in
Iranian output are unlikely following a softening of US measures that force
buyers of Iranian crude to reduce imports, the report noted.
Iraq and Libya saw the largest output gains in October (+130 kbpd or so).
Escalating security issues in both countries are expected to have curtailed
production in November, with some international oil firms looking to reduce
operations or even exit from Libya. At its December 4th meeting in Vienna,
OPEC members agreed to keep the group's output ceiling unchanged at 30 mbpd.
Non-OPEC oil supplies are projected to increase by a significant 1.6-1.8
mbpd in 2014, of which 0.2 mbpd is expected to come from OPEC (but not subject
quota) natural gas liquids. Non-OPEC supply growth will be led by the
continued boom in North American production. If aggregate OPEC output remains
at current levels (with cuts in Saudi output offsetting increases by other
OPEC producers), it should fall on average next year but global supplies could
still increase by up to 1.3 mbpd, following an expected increase of 0.8 mbpd
in 2013, it indicated.
Unchecked, surging non-OPEC production and a potential rise in output from
certain OPEC producers could materially weaken oil market fundamentals next
year. Other OPEC members - notably Saudi Arabia - may therefore need to manage
supply more tightly in order to maintain prices at above USD 100.
Using the CGES's forecast of a 1.2 mbpd increase in global oil demand in
2014 and a significant 1.8 mbpd increase in non-OPEC supplies, global
inventories could rise by 0.5 mbpd, the report concluded. (end)
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