1. Short-term Oil Market Developments
National Oil and Gas Forum
17-18 April 2018, Moscow
Short-term Oil Market Developments
Presented by:
OPEC Secretariat

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3. Outline Short-term market outlook Review of the oil market 2014-2016
Declaration of Cooperation
Supply/demand in the short-term

4. World oil supply growth outpaced oil demand growth during 2014-2016, y-o-y change, mb/d
From 2014 to 2016, world supply grew by 5.4 mb/d,
while word oil demand increased by 4.3 mb/d.
As you can see in this slide, there was a mismatch in market fundamentals in the years 2014 to 2016 as higher price levels before have led to a surge in oil production – in particular in non-OPEC supply – which did not immediately cease with the sudden demise in prices.
As a matter of fact, these elevated production levels continued for quite some time, until the end of 2015, and were not met by similarly healthy world oil demand during the same period.
So, while world oil supply grew by 5.5 mb/d over these three years, global oil demand only increased by 4.1 mb/d.
Source: OPEC Secretariat.

5. Rise in OECD commercial inventories, mb
As we all know this has led to a surge in oil inventories.
On the left hand side you can see the excess supply accumulated during , resulting in a sharp rise in OECD stock levels, beginning already in 2014 and soaring over the next two years.
But not only did stocks rise steeply in absolute levels, also the difference to the five-year average – shown in the right hand side graph – saw an enormous rise from a mere 8 million barrels in October 2014 to stand at 386 mb in July of 2016.
This had an immediate effect on prices as they plunged on the back of excess oil supply in the market.
This fall in prices saw its impact on investments, with exploration and production spending decreasing dramatically by more than 40% during those two consecutives years.
Source: OPEC Secretariat.

6. OPEC landmark decisions in 2016
Algiers Accord
170th (Extraordinary) Meeting of the Conference – September 2016; Algiers
Vienna Decision
171st Meeting of the Conference – 30 November 2016; Vienna
Adjustment of 1.2 mb/d from OPEC-11 countries
Joint Declaration of Cooperation
OPEC and non-OPEC Ministerial Meeting – December 2016; Vienna
Adjustment of 0.6 mb/d from 11 non-OPEC participating countries
In response to this market developments, it was the initiative of OPEC Member Countries to join forces with key non-OPEC oil producing nations to gather enough momentum and weight to be able to impact market fundamentals to provoke a change.
First guidelines were discussed in Algiers in September of 2016, followed by a framework which was decided upon at the OPEC Conference of Ministers a couple of months later in November and it all culminated in the Landmark Declaration of Cooperation, signed by 24 sovereign states to voluntarily adjust their oil production in an effort to draw down overfilled global inventories and return the oil market to a balanced state.
Source: OPEC Secretariat.

7. Drop in OECD commercial oil stock since Declaration of Cooperation by component and region
Despite skepticism from many market observers, the Declaration of Cooperation has proven to be a resounding and historic success. In fact, it has gone beyond what was originally envisaged.
Beginning in January 2017 with already high conformity levels by participating countries, the discipline and motivation to succeed advanced throughout the year. It ended with an astounding 133% conformity for the month of January, with the average for the year a remarkable 109%.
It begs the question: what has this conformity been able to achieve?
As we can clearly see in the two graphs on the right, OECD commercial stocks have dropped significantly since the beginning of 2017 across all OECD regions.
Sources: Euroilstock, IEA, METI, OPEC Secretariat and US EIA.

8. Crude oil prices improved Driven by a sizeable stocks draw as well as signs of bullish market sentiment
Sources: Intercontinental Exchange and OPEC Secretariat.

9. Performance of the world economy GDP change from the previous year, %
Note: * 2018 = Forecast.
Sources: OPEC Secretariat, IMF, Markit and Haver Analytics.

10. Oil demand growth remains healthy in , while non-OPEC supply recovers during the same period
Source: OPEC Secretariat.

11. National Oil and Gas Forum
17-18 April 2018, Moscow 11