Credit Suisse Group (CS), a Swiss multinational financial services holding company, forecasts that global demand on Egypt’s oil will be 5,000 barrels per day in 2017, compared to 51,000 barrels per day in 2016, a decrease of 90.1%. CS forecasts that the global demand on Egypt’s oil will be reduced to 4,000 barrels per day in 2018, a decrease of 92.1%.
CS issued a report on Monday expecting that the global demand on Egypt’s oil in quarter three (Q3) 2017 will be decreased by 0.4%, compared to Q2 2017 that reduced by 0.7%. Meanwhile, in Q1 2017, the demand was 2.5% of the global demand.
The report proposed that the global demand on Egypt’s oil in Q1 2018 will be reduced again from 1.4% in Q4 2017 to reach 1%. Furthermore, it will witness a severe decrease in demand to reach 0.1% in Q2 2018.
It projected that the demand on Egypt’s oil will represent 0.6% of global demand for oil in 2017 and will decrease one percentage point to reach 0.5% in 2018; however, it reached 1.3% in the period from 2011 to 2015.
CS forecasts $48 per barrel of West Texas Intermediate (WTI) in the second half (H2) 2017 and H1 2018, rising into the mid $50s in H2 2018. The report pushed out the rebalance through 2019, with new long-term WTI forecasts at $57.5 per barrel.
WTI, also known as Texas light sweet, is a grade of crude oil used as a benchmark in oil pricing. This grade is described as light because of its relatively low density, and sweet because of its low sulfur content.
“Nigeria and Libya production surprised to the upside, and demand growth hit a speed bump in Q1 2017, muting the pace of US inventory draw thus far. We anticipate a modest draw through the remainder of 2017 as DUC completions and outspending continue to drive shale growth, projecting a 120 million barrel per day OECD inventory surplus at the end of Q1 2018; hence, we see limited near-term price upside and update our 2H 2017 WTI forecast to $48 per barrel,” the report read.
Furthermore, the report assumed that OPEC will extend its ceiling until US inventories move to the top of the 5-year average in Q3 2018, with broadly similar (to current) levels of adherence. Moreover, the report slightly lowered US onshore growth assumption, moving from a slight acceleration to slight deceleration year-on-year (y-o-y), given lower prices and, thus far, less hedging heading into 2018.
“Our revised 2018 WTI quarterly forecasts are $48, $52, & $54 per barrel. Our 2019 forecast follows through with the rebalancing view, averaging $55.8 per barrel,” the report added.
On the long term (to 2020), the report noted that the oil prices will be reduced by $5 per barrel (to WTI at $57.5 per barrel; Brent at $60 per barrel). This is reflective of efficiency for international developers for as yet unsanctioned oil projects.
The report pointed out that Q1 2017’s oil demand growth underperformed, but this has been resolved. Specifically, India registered a 0.5% y-o-y demand decline in the first quarter, after growing 8% y-o-y in 2016. Meanwhile the US grew only 0.2% y-o-y in Q1 2017, despite growing 1.1% y-o-y in H2 2016, according to the report.
The Mideast and smaller EM Asia economies also underperformed in early 2017, but growth has since broadly improved across the board. Global demand growth accelerated from 1.0% y-o-y in Q1 to 1.5% y-o-y in Q2 17.
Russia should continue to comply as well, given it is a critical lynchpin in holding the agreement together from a political standpoint, and also from a timely oil market rebalance standpoint.
Credit Suisse Group is a Swiss multinational financial services holding company, headquartered in Zurich, that operates the Credit Suisse Bank and other financial service investments. The company is organised as a stock corporation with four divisions: Investment Banking, Private Banking, Asset Management, and a Shared Services Group that provides marketing and support to the other three divisions.