Middle East oil supply is estimated to fall by 0.03mn bpd this year compared with 2015 to average 1.23mn bpd in 2016, Opec has said.
“There is no expectation for growth or decline in oil supply in Oman and Syria, while oil output in Yemen is expected to decline to a negligible level of 10,000bpd in 2016,” Opec said in its latest monthly oil market report released yesterday.
Moreover, the report said, the Middle East supply forecast is associated with a very high level of risk, mainly due to political factors, which could dramatically change the outlook in either direction.
On a quarterly basis, Middle East oil supply in 2016 is seen averaging 1.24mn bpd, 1.23mn bpd, 1.22mn bpd and 1.22mn bpd respectively, Opec said.
“The analysis indicates that 2016 will be a supply-driven market. It will also be the year when the rebalancing process starts,” the report said.
After seven straight years of phenomenal non-Opec supply growth, often greater than 2mn bpd, 2016 is set to see output decline as the effects of deep capex cuts start to feed through. The lingering effects of a few years of solid additions – sanctioned during four years of $100 oil – will help to reduce the decline, as more than 2mn bpd of new projects are still planned for 2016.
But the decline in maintenance capex should also start to show through higher decline rates and possibly greater supply outages, Opec said.
Places such as Canada, the North Sea, Latin America and parts of Asia are particularly vulnerable, with all projects in Canada now below cash cost.
On a regional basis, OECD Americas is expected to have the highest production decline, dropping by 0.45mn bpd, followed by the former Soviet Union, the Organisation for Economic Co-operation and Development (OECD) Europe, Middle East, Africa and OECD Asia Pacific, while production in Latin America and other Asia is seen increasing.
Growth is expected to come mainly from Brazil, Canada, Malaysia, Australia, Asia (others), Africa (other) and China, while oil supply from Mexico, UK, Indonesia, Egypt and FSU is seen declining.
The risk and uncertainties associated with the supply forecast due to the oil price collapse remain high on both sides, especially for the US, Canada, Russia, Brazil and the UK, it said.
On a quarterly basis, non-Opec supply in 2016 is expected to average 56.46mn bpd, 56.01mn bpd, 55.93mn bpd and 56.43mn bpd respectively, Opec said.