Economic Report 2017

Oǀer the short term, suƉƉly ǁill continue to dominate Ɖrice edžƉectations͘ According to WetroͲLogistics, outƉut Ĩrom those committed to the OW agreement increased ďy more than ϲ00,000 ďoeƉd in :uly comƉared ǁith the Ĩirst halĨ oĨ 2017, ǁhich marŬs the third consecutiǀe month oĨ reduced comƉliance as certain memďersΖ commitment to the agreement Ĩalters͘ &urthermore, groǁing ǀolumes Ĩrom countries such as Eigeria and Liďya that are edžemƉt fr om t h e agr e e m e nt ar e p ut t ing fur t h e r p r e ssur e on t h e de al’ s e ffe ct iv e ne ss. A ny long- t e r m gr ow t h in oil p r ice w ill not only reƋuire a reduction in outƉut Ĩrom OW , ďut also a gradual reduction oĨ oil inǀentories, many oĨ ǁhich ar e h e ld in Nor t h A m e r ica. Onshore shale Ɖroduction Ĩrom the U^ Loǁer ϰϴ ^tates more than douďled ďetǁeen 2011 and 201ϰ, driǀing an increase in total U^ outƉut to around 12͘ϯ million ďoeƉd, ǁhich has remained Ĩlat oǀer the last tǁo years͘ esƉite the Ɖressures on gloďal oil Ɖrice, outƉut has increased ďy oǀer ϯ00,000 ďoeƉd during the Ĩirst halĨ oĨ this year 12 . T h e r e ne w e d r e silie nce of US p r oduct ion h as b e e n dr iv e n b y an incr e ase in dr illing act iv it y w it h t h e r ig count at it s highest in oǀer tǁo years͘ Alongside Ĩurther Ɖroductiǀity imƉroǀements Ĩrom edžisting ǁells, Ɖroducers haǀe ďeen ab le t o succe ssfully incr e ase out p ut at lit t le m ar ginal cost . Oil de m and is e x p e ct e d t o cont inue t o incr e ase ov e r t h e se cond h alf of t h is y e ar and w ill b e an im p or t ant fact or in de t e r m ining w h e t h e r t h e com b ine d e ffor t s of OP E C t o r e duce t h e w or ld sup p ly glut ar e e ffe ct iv e . By t h e e nd of this year, ǁe could see aǀerage annual gloďal demand edžceed suƉƉly Ĩor the Ĩirst time in more than three years͘ IĨ signs oĨ a change in demand are not aƉƉarent ďy the third Ƌuarter oĨ this year, then there could ďe calls Ĩor Ĩurther cut s in out p ut b y OP E C . T h is v olat ilit y and unce r t aint y in t h e m ar ke t w ill like ly p e r sist int o 2018 - 19. Gas Prices and Markets The E W dayͲahead gas Ɖrice has aǀeraged ϰϯ͘ϯ Ɖenceͬtherm ;ƉͬthͿ oǀer the Ĩirst halĨ oĨ this year, ϰ0 Ɖer cent h igh e r t h an t h e 30.8 9 p / t h in t h e fir st h alf of 2016 . T h is is lar ge ly due t o a sh ar p p r ice incr e ase ov e r t h e se cond h alf of last y e ar and int o t h e e ar ly p ar t of t h is y e ar . A lt h ough t h e r ole of gas as a h e at ing fue l m e ans it is com m on Ĩor Ɖrices to ďe higher oǀer ǁinter months ǁhen demand is higher, the imƉact ǁas heightened oǀer the ǁinter oĨ 2016 - 17 due t o a sh or t age of gas st or age and unce r t aint y ov e r liq ue fie d nat ur al gas sup p ly t o t h e UK. T h e p r ice has Ĩallen Ƌuite raƉidly since, reaching a daily loǁ oĨ 2ϱ Ɖͬth in :une this year, almost ϲ0 Ɖer cent ďeloǁ the daily high oĨ ϲ0͘ϴ Ɖͬth at the start oĨ &eďruary, and shoǁs little sign oĨ structural recoǀery in a marŬet deĨined ďy a large glob al ov e r sup p ly .

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12 ^ource͗ U^ nergy InĨormation Administration

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