Oil-Related Developments - April 2017

Oil prices remained around $ 52-53 for Brent and $ 49 for WTI during the first days of April. WTI prices were above $ 49 on reports of increased refinery purchases and declining gasoline inventories. Prices were also kept at these levels following reports that OPEC would very likely extend production cuts beyond end-June.

Following the US missile strike in Syria, Brent crude futures jumped to $56.08 per barrel, in what traders called a knee-jerk reaction, before easing to $55.62 per barrel at 0704 GMT, still up 1.3 percent from their last close. US West Texas Intermediate (WTI) crude futures also climbed by more than 2 percent, to a high of $52.94 a barrel, before receding to $52.46, up 1.45 percent.

On 13 April, the IEA provided some good news for producers when it said that the oil market is "slowly but surely" reaching a balance as a result of the success of the OPEC production deal. "We're seeing demand growing fairly steadily in the oil market and we think that the balance is coming together slowly but surely and the numbers are there to support it," the IEA spokesman said shortly after the IEA published its monthly oil report. Oil producers were said to have scored "fairly well" since OPEC and non-OPEC countries implemented a landmark deal to curb global oversupply at the start of the year.

According to the IEA's monthly report, global demand growth is poised to fall for a second consecutive year as a result of subdued gains, most notably in Russia and India. The IEA forecast global demand growth of 1.3 million b/d (barrels per day) after a weaker-than-expected thirst for oil from investors in the first three months of the year. Brent crude traded at around $55.83 a barrel on 13 April, while WTI was around $53.05 a barrel.

The IEA assessment is shared by the Arab Monetary Fund. World oil market is expected to see a partial recovery in 2017 and 2018 in light of the OPEC and non-OPEC output cuts of 1.8 million barrels per day.  While the production cuts will help bring an oil market balance in 2017, oil demand is expected to increase by 1.2 million barrel per day this year, its report said. The report added: "These developments will support oil price increases in 2017 and 2018, compared to levels recorded in 2016 which reached $40.8 per barrel for the OPEC price basket. However, the expected increase in shale oil production due to the price gains will limit the upward trend of oil prices during 2017 and 2018."

 

April 17, 2017 

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About the Author

Ambassador Talmiz Ahmed

Former Ambassador of India to Saudia Arabia, Oman and UAE, monitors developments in the West Asian region.  

Ambassador Talmiz Ahmad joined the Indian Foreign Service in 1974. Early in his career, he was posted in a number of West Asian countries such as Kuwait, Iraq and Yemen and later, between 1987 and 1990, he was Consul General in Jeddah. He also held positions in the Indian missions in New York, London and Pretoria. He served as Indian Ambassador to Saudi Arabia (2000-03; 2010-11); Oman (2003-04), and the UAE (2007-10). He was also Additional Secretary for International Cooperation in the Ministry of Petroleum and Natural Gas in 2004-06. In July 2011, the Saudi Government conferred on him the King Abdul Aziz Medal First Class for his contribution to the promotion of Indo – Saudi relations. After retirement from the Foreign Service in 2011, he worked in the corporate sector in Dubai for three years. He is now a full-time academic and holds the Ram Sathe Chair for International Studies, Symbiosis International University. He has published three books: Reform in the Arab World: External Influences and Regional Debates (2005), Children of Abraham at War: the Clash of Messianic Militarisms (2010), and The Islamist Challenge in West Asia: Doctrinal and Political Competitions after the Arab Spring (2013). He writes and lectures frequently on Political Islam, the politics and economics of West Asia and the Indian Ocean and energy security issues.