Global seaborne crude oil trade grew by an estimated 4.3% in 2016 to 39.0m bpd. However, as 2017 begins there are a number of different and important factors that may affect both crude importers and exporters, leading to a significant amount of uncertainty and a wide range of possible scenarios for global seaborne crude trade this year. So, what are the factors to watch for crude trade in 2017?
The OPEC Factor
One of the key areas of uncertainty surrounds OPEC crude exports, following the group’s announcement in late 2016 that it intends to cut crude output by 1.2m bpd in 2017. However, the potential for non-compliance with cuts, given the group’s historical record, creates some uncertainty. Meanwhile, Iran is exempt from the cuts as it seeks to restore output back to pre-sanctions levels, supporting expectations of Iranian crude export growth in 2017. Overall, current projections are for total Middle Eastern seaborne crude exports to fall 1% in 2017.
Another key factor is Nigerian and Libyan crude exports, with output in both nations hamstrung by disruption. Both countries are exempt from OPEC production cuts, but the extent of any possible recovery in crude output is currently unclear. If disruptions were fully resolved these two nations could theoretically add 2m bpd of extra crude exports, but it is currently expected that Nigerian and Libyan crude exports will remain depressed in 2017.
Not Forgetting Non-OPEC
Additionally, several non-OPEC nations agreed to cut their oil production in 2017. Notably, Russia stated it would reduce output by 0.3m bpd. However, Russia also has a history of non-compliance with cuts, whilst it is possible that announced cuts elsewhere may be met through expected production declines, adding to the uncertainty. That being said, initial projections are for total FSU seaborne crude exports to fall 1% in 2017. Overall, as OPEC accounted for around 40% of global crude output and 60% of seaborne crude exports in 2016, the announced wider cuts are expected to have a greater impact on crude trade than oil production.
Ups And Downs For Imports
There is also uncertainty surrounding crude importers. One scenario is that OPEC and non-OPEC production cuts will support rising oil prices, boosting US crude output. However, there is significant uncertainty around the extent of possible recovery in US shale oil output given its sensitivity to oil price levels. Current expectations are for US crude output to rise, depressing US seaborne crude imports by 10% in 2017. Additionally, higher oil prices could lead to softer refinery margins and stock drawdowns, which may depress crude imports in regions such as Europe. However, total Chinese and Indian crude imports are expected to rise 0.8m bpd in 2017, partly supported by likely increased refinery activity.
So, there are a number of factors to watch out for in 2017, including OPEC output cuts, US shale oil and the fortunes of Nigeria and Libya. With so many factors at play, it is hard to precisely estimate future seaborne crude trade, with initial projections for just 0.2% growth in 2017. What is clear today is that there is a lot of uncertainty.
Source: Clarkson Research Services LimitedPrevious Next