What had the biggest impact on energy markets in 2017? Political tides have turned in 2017. In particular, political changes in Iran, Saudi Arabia and Iraq have impacted energy markets.
What threatens the compliance of Opec and non-Opec’s deal to continue production cuts in 2018?
Opec in 2017 showed discipline with its output deal with 10 non-Opec countries to cut a combined 1.8m b/d. S&P Global Platts’ monthly survey of Opec crude production puts compliance among the 12 Opec members from January-November at 108 per cent. But the tide might be turning. With oil prices now touching three year highs, several analysts believe compliance could slip in 2018.
What helped balance global oil inventories in 2017?
Global oil market rebalancing accelerated in 2017 with surplus stocks falling 1m b/d during the year, virtually eliminating the entire surplus. Strong oil demand growth and the Opec and non-Opec cuts were the key factors driving the inventories decline.
What is the general outlook for US shale oil?
US crude exports have soared, averaging over 900,000 b/d. Exports have been nearly evenly split between Canada, Europe, Latin America and Asia. These will grow because US refineries are more geared for heavier grades. On the other hand, some analysts see the drop in the US rig count and question whether US shale oil output will continue rising.
The ability to export freely should help by matching grades with buyers instead of pushing complex USGC refineries to process more light crude.
Concerns remain with respect to the response of US shale oil to higher oil prices. However, the shale hype seems to be over, with CEO’s and management teams being held strongly accountable to deliver positive cash flow over production growth even with oil prices above $60/bl
What are the top three trends that will drive the global LNG market in 2018?
Rising Asian demand will absorb more LNG from each of the three global LNG supply basins, with sharp rises in flows from the Pacific and Atlantic basins.
US LNG exports have more-than quadrupled due to four Sabine Pass liquefaction trains ramping-up on the US Gulf Coast in 2017. The flexible nature of these cargoes helped them meet Asian LNG demand. Australian LNG production also jumped over 30 per cent. It will be interesting to see how the market absorbs additional capacity expansion in 2018. It will also be interesting to see how LNG prices evolve in 2018.
Platts JKM benchmark has reached a three-year high, rising above $11/MMBTU driven by seasonal strength and policy in countries like China looking to switch away from coal to cleaner energy like gas.
What next for the potentially revolutionary electric vehicles market?
Growing sales are seen as a major support for prices of key ingredients of lithium-ion batteries including cobalt and nickel.
S&P Global Platts Analytics expects accelerating global electric vehicle penetration, rising from a little more than 500,000 sales in 2015 to over 7m by 2025 – driving a surge in demand for lithium-ion batteries.
This must be put into perspective with the 80m new cars sold every year. However, questions remain over metal supply at the right prices.
Martin Fraenkel
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