Oil & gas macro outlook – Accelerated rebalance

On 30 November 2016, OPEC and select non-OPEC oil exporters agreed to cut output by a combined 1.76mmb/d in 2017, prompting us to review our short-term oil price assumptions. OPEC views this as a necessary catalysis of the rebalancing process to secure medium-term oil supply and the role of crude oil within the global energy mix. Assuming OPEC’s 14 members (OPEC-14) and Russia comply with >70% of pledged output reductions in early 2017, we expect global inventories to fall in Q217, reaching the top of their five-year range by the end of 2017. We estimate that OPEC compliance will accelerate crude oil inventory draws by around six months from earlier IEA forecasts (November 2016 oil market report). We maintain oil price assumptions in line with the EIA at $51.7/bbl in 2017, rising to $70/bbl (real) long term – minor adjustments from our forecasts in June 2016.

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