Middle East crude oil production is set to keep up pace with the tanker market, boding well for future demand. OPEC’s latest round of discussions ended with the decision to maintain crude oil production, something expected by most pundits and analysts.
The production target of 30 million bpd, as shipbroker Gibson noted in its latest report, “failed to garner much of a market reaction and was largely perceived as little more than a token gesture to Iran, one of the most vocal opponents of the de facto strategy of defending market share at the expense of prices, hellenicshippingnews.com reported.
The group has not adhered to is production target for the past 12 months and few expect that to change any time soon. It therefore seems apparent that OPEC Middle East crude production – a key driver of crude tanker demand, will remain robust for the balance of 2015 at least” said the London-based shipbroker.
It added that “despite Iran’s stance on OPEC’s emergent strategy, its ministers have been clear that Iran intends to restore exports to pre sanction levels if restrictions are successfully lifted.
Iranian ministers have confidently expressed that production could increase by 500,000 bpd soon after sanctions are unwound and by another 500,000 bpd within 6 months. Whilst some market participants believe Iran is overstating its capabilities, the approx. 38 million barrels of Iranian oil in floating storage, in addition to shore based stocks could quickly add supply to the market. Nevertheless talks between the West and Iran are due to conclude this month, increasing the prospect of more Iranian barrels, even if the absolute volumes are questionable.
Even if these barrels do materialize, there is little indication that other OPEC members would be prepared to sacrifice their own share in order to accommodate Iran’s ambitions”.
“Ultimately there is more Middle East OPEC crude in the pipeline, although barriers, whether political, logistical or seasonal remain. Taking Iran out of the equation, higher OPEC production over the coming months may not translate into higher tanker demand as domestic air conditioning use peaks throughout the summer months whilst the Yanbu and Ruwais refineries also continue to consume regional supplies.
However, global oil demand is rising faster than initially anticipated with the IEA’s latest report projecting 2015 demand growth of 1.4 million bpd, double the growth witnessed in 2014, providing a further incentive for OPEC members to continue to produce and subsequently supporting tanker earnings for the balance of 2015”, Gibson concluded in its report.
