Research Highlights

Here you will find regular updates on some of the most notable research outcomes generated by our team of analysts.

Libyan and Nigerian increases partly offset OPEC cuts (see Energy Market Report – July 19)

  • Libya is reportedly currently producing above 1 million b/d
  • Nigerian output is seen around 1.7 million b/d (pure crude) and we expect a gradual increase towards 1.8 million b/d in Q1 2018
  • This is in line with the recent agreement of Nigeria to join the OPEC/non-OPEC deal once they reach a sustainable level of 1.8 million b/d
  • Combined output from Libya and Nigeria is set to be 900,000 b/d higher by end of 2018  compared to the October 2016 level


US shale production has the potential to increase another million b/d by 2018 (see Energy Market Report– July 11)

  • Based on EIA data, we believe it would be plausible that US shale output increases 1 million b/d by end of next year
  • A key assumption behind this is keeping current completion rates and 2017 average initial production rates stable
  • We modelled the additional declines from higher production
  • The increase is mainly driven from the string activity in the Permian Basin

In our crude balances we see an overall deficit flipping to a surplus between August and September, with an assessed m-o-m lengthening in the region of 2 million b/d (see Crude Oil Barrel – Issue 7)

  • From a trading perspective, this should become increasingly relevant for physical crude differentials over the next 4-6 weeks
  • We see the lengthening in the overall balance skewed strongly towards the Atlantic Basin, as the seasonal decline in crude intake coincides with stronger Q3 supply
  • The lengthening in the East of Suez trading balance is mitigated by a longer trading horizon which should account for some tightening after peak autumn maintenance
  • We expect these trends to keep interregional arbitrage spreads under pressure and allow for crudes like Urals to continue moving to Asia in large quantities

The  burgeoning US crude export flow is only one half of a dynamic which has seen the total amount of crude moved into and out of the US surge y-o-y, and we think that H2 could bring even more pronounced growth (see Quarterly Refining Outlook – Issue 3)

  • Expanded infrastructure combined with growing domestic supply has seen exports boom, topping 1 million b/d on occasion and averaging more than 800,000 b/d ytd
  • At the same time, crude imports have been more than 300,000 b/d higher so far this year, as the expanded export outlet has effectively allowed US refiners to swap a greater share of unwanted light barrels for more suitable grades from the international market
  • We see further increases in exports as likely over H2, in line with more infrastructure adjustments and further supply increases. If this materialises, higher import levels will be required to keep net import levels in sync with the US crude balance

US crude production growth racing ahead but end in sight (see Americas Weekly – Issue 24)

  • Although weekly EIA data always has to be taken with a pinch or two of salt, the fact that the current 4- week average of implied crude production is currently just above 9.7 million b/d is hard to ignore.
  • While eventual monthly reported figures usually match best when averaging the implied figure with the official weekly estimate, even this figure is now close to 9.6 million b/d, or some 500,000 b/d above the reported level for March.
  • The usual lag between price movements and production imply a few more months of potential output growth, however, rising contango and the associated intentional constraints to initial production could soon start to have a tangible effect on production growth developments in the US.

We see 2017 global oil product demand growth to be some 1.3 million b/d on an annual average  (see The View Europe and The View AsiaIssue 6)

  • Global demand growth is showing signs of speeding up in key regions such as US gas oil/diesel, as well as generally in China and India.
  • We see some downside risks to Americas gasoline demand in the coming months, but considerable upside potential.
  • From the various risks to our base case outlook, the upside risks (particularly global jet/kero demand, other non-OECD Asia and Europe road fuels) appear to be more likely to materialise, especially with the support of low oil prices and given that they would only need a continuation of past trends. The downside risks are more speculative.

Production shifts pulling up gravity of crude supply (see Crude Oil Barrel– Issue 6)

  • We estimate that changes in crude supply over 2017 so far have made a notable difference to the average quality of the crude slate supplied to the market.
  • The dominant factors here have been the loss of a significant amount of OPEC crude vs. Q4 levels (mainly Middle East), combined with a surge in low density US output.
  • We estimate that these have served to lift the API gravity of the overall slate by between 0.1-0.15 degrees compared with Q4.


Russia is still set to see some refining capacity additions this year (see FSU/CEE Insight – Issue 21)

  • We expect several gasoline-focused units to come online this year in Russia with almost 60,000 b/d of reforming capacity, about 20,000 b/d of isomerization capacity and 30,000 b/d of catalytic cracking capacity.
  • According to our estimates, the new units are capable of bringing an additional 50,000 b/d of gasoline output capacity onto the market by the end of the year, which together with post-maintenance ramp up of existing capacity should boost gasoline production significantly over the coming months.
  • This is of course based on the assumption of timely unit ramp-ups, which have historically rarely been the case in Russia with the delayed ramp-up of the hydrocracker at Lukoil’s Volgograd refinery being a noteworthy example.

sample-image-twoThrough 2022 we expect a cumulative demand addition of 4.8 million b/d, averaging about 1% of demand growth per annum (see Mid-Term Outlook, Issue East of Suez – 26 May 2017)

  • Initially, we see oil demand growing by more than 1 million b/d y-o-y up to 2020, after which we expect a marked slowing, with growth in 2021 and 2022 decelerating to 730,000 b/d y-o-y and 450,000 b/d y-o-y.
  • The main growth drivers will be China, India, Brazil, Saudi Arabia, and Iran. On a sectoral basis, we forecast that the transportation sector will contribute the most to demand growth, as we see the affordability of alternative vehicles being limited in developing countries. Moreover, we forecast power and industrial use to decline.
  • Europe is the only region where we expect to see demand declining, by 350,000 b/d. Up to 2022, we can observe a structural distinction between OECD and non-OECD economies. Demand in European OECD economies is forecast to fall by 400,000 b/d. In contrast, we see oil demand in non-OECD economies rising by around 50,000 b/d.


OPEC Cuts into 2018?                         (see Energy Market ReportMay 16, 2017

  • The prospect of production cuts stretching into 2018 has been raised by Saudi Arabia and Russia
  • In a no cut extension scenario, we see 2018 total liquids balance as being strongly oversupplied by some 1.6 million b/d
  • The potential extension of the cuts program to the end of March 2018 would not alter this picture drastically
  • Only if we assume strong compliance with cuts for the whole of next year can we envisage a market which comes closer to be balanced