The next OPEC meeting is just over two weeks away. In annalysts's view, the oil market has yet to reach consensus on the effect of the previous OPEC meeting. Opinions are divided over the extent to which the market has tightened due to the fall in prices, and the relative importance of the various changes.
The market outcomes for H1-2015 was compared with a business-as-usual (BAU) scenario in which supply and demand continued in line with the situation at the time of the last OPEC meeting. Under that scenario US shale oil output continues to grow m/m at around 120 thousand barrels per day (kb/d), Libya's output remains high, Saudi Arabia maintains output of 9.6mb/d and y/y global demand grows at a fairly sluggish 1mb/d.
That scenario was compared with what has actually happened in H1-2015. Overall, the market has tightened by around 140 million barrels (mb) relative to the BAU scenario, an average rate of just under 0.8mb/d, calculates Standard Chartered. The largest contribution to that has come from a greater than expected increase in demand, which accounts for 80% of the net tightening.
In analysts view, the unexpected strength of demand has been the most underreported aspect of the oil market so far in 2015. The main supply-side factor has been the cumulative loss of Libya's output, while extra output elsewhere in OPEC has so far offset the falls in non-OPEC output. US shale oil's movement from strong net growth to net decline has been a relatively minor factor across H1, although it is increasingly important at the margin given the greater decline in Q2.
"A declines in conventional non-OPEC output is expected to play a greater role, with the pace of tightening relative to BAU expected to accelerate significantly in H2" states Standard Chartered.
