1. Summary
Oil Market
- The current producer’s group (OPEC and Russia) agreement to manage supply set a floor price for oil around $50/b. For most of 2017, prices remained in the mid-$50/b range. However, price gains beyond $50/b tend to offset by increased U.S. tight oil production causing a counterbalance to producer’s group cuts.
- Brent oil prices fell more than 10% in the last week as high inventories and increased drilling activity in the United States fueled speculation about the effectiveness of OPEC’s cuts.
- Unexpected builds in U.S. crude inventories due to increased imports and lower refinery runs coincided with substantial draws from gasoline stocks. Since the producers agreement came into effect in January, U.S. inventories increased by almost 50 mb
Natural Gas & LNG
- New Pacific liquefied natural gas (LNG) supply, along with lower oil prices, caused Asian spot prices to fall throughout the middle of the year. However, unplanned outages and colder weather contributed to a price recovery since June 2016.
- Gazprom gas sales to Turkey and Europe fell in February. Excluding the former Soviet Union countries, Gazprom’s sales to Turkey and Europe dropped to 582 million cubic meters per day in February, down by 34 million cubic meters per day from the January average.
- An apparent resolution of the EU-Gazprom anti-trust case, in addition to possible political developments in Europe and the United States, may lesson past concerns over excessive EU reliance on Russian gas and might reduce EU opposition to Nordstream. 2
Geopolitics & Supply
- IEA data showed OPEC production to be 32.1 mb/d in January, representing 90% of compliance with coordinated cuts. Iraq and Iran did not appear to meet their targets, while both Saudi Arabia and Venezuela cut more than required. Saudi Arabia reported an increase in production for February compared to January.
Renewables
- Turkey has installed 571 MW of new solar PV capacity in 2016, making it the best year for the country’s solar sector. 2017 is expected to be equally good, however there exist some uncertanities regarding future prospects. Overall, Turkey’s total installed capacity has now reached 78.49 GW and the national target for solar PV technology is expected to reach 5 GW by 2023.
- The International Energy Agency (IEA) significantly increased its five-year growth forecast for renewables, due to strong policy support in the United States, China, India, and Mexico.
Economics
- The U.S., European and Asian economies remain positive, though possible protectionist policies in the U.S. and political uncertainty in Europe add to downside risk.