Economic Report 2018

3.1 Oil and Gas Markets

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Oil Market During the first half of 2018, Brent crude averaged $70.3 per barrel (bbl), 29 per cent higher than in 2017 ($54.2/bbl) and more than 60 per cent higher than in 2016 ($43.4/bbl). The increases so far this year were seen mainly during the second quarter (April to June), when prices averaged almost $74/bbl – the highest quarterly average since the fourth quarter of 2014 – and briefly hit $80/bbl in May for the first time in more than three years, before falling back to the low $70s more recently.

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Figure 1: Monthly Brent Price

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140

120

4

100

5

80

60

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40

Dated Brent Nominal Price ($/bbl)

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20

0

2010

2011

2012

2013

2014

2015

2016

2017

2018

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Source: EIA

The oil market continues to be characterised by uncertainty around the balance between supply and demand. The International Energy Agency (IEA) has forecast that total annualised demand growth will increase by around 1.4 million barrels per day (bpd) throughout 2018. 1 Demand growth throughout the first half of the year was, in fact, greater than this (1.5 million bpd), largely driven by:

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• Extremely cold weather conditions across Europe and the US • Increased refining demand in the US • Strong global economic performance within both OECD and non-OECD countries

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This growth, however, is expected to slow to 1.3 million bpd throughout the second half of the year, as a result of the knock-on impact of higher oil prices and expectations of a slowdown in the economic growth outlook, particularly within non-OECD countries.

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1 www.iea.org/oilmarketreport/omrpublic/

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