Oil and gas activities, international market conditions (discontinued), Q1 2014

Brent Blend

The average Brent Blend crude price in the 1st quarter of 2014 was USD 107.9/bbl compared to USD 109.4/bbl in the 4th quarter of 2013.

The Brent Blend was traded in the USD 105.8-111.2/bbl range during the first quarter of 2014. The lowest price was traded on 4 February and the highest price was traded on 3 March. This stable price development also continued in the first half of the second quarter.

While the average crude oil price in January was USD 107.1/bbl, the price increased moderately to USD 108.8/bbl in February. The average crude oil price in March was USD 107.8/bbl.

The following factors have been important for the price dynamics in the first quarter:

The IMF adjusted downward its growth estimates for the global economy for 2014 in the first quarter. Crude oil demand is closely connected to the level of economic activity. Therefore, the oil demand outlook was also adjusted downward.

The production growth outside OPEC is expected to exceed the global demand growth in 2014, which gives the potential for a less tight oil market this year.

The tension between Russia and Ukraine seen in the first quarter has not affected the oil supply from Russia. However, the geopolitical tension that the crisis has generated between Russia and the EU/USA has increased the market concern for future disruptions in the Russian oil supply.

The long, cold winter in the USA resulted in a higher demand for heating oil. In addition, the shale oil production in USA was inhibited by the cold weather. This resulted in a moderate increase in crude oil prices in February.

OECD’s oil stocks were in constant decline last autumn, and in January were at the lowest level for many years. This contributed to keeping the crude oil prices at a high level.

The disruption of the Libyan crude oil production continued in the first quarter due to political unrest. The sanctions on Iran and the political unrest in Libya and Nigeria have resulted in a lower spare capacity in global crude oil production in the last year. The spare capacity acts as a safety margin in the global oil supply and the amount of capacity available affects the crude oil prices.

Global production and demand for crude oil

According to the International Energy Association (IEA) Monthly Oil Market Report, the global production of crude oil came to 92.1 million barrels a day in the first quarter of 2014. This is an increase of 1.2 million barrels a day compared with the crude production in the same quarter of 2013.

Also according to the IEA, the global demand for crude oil came to 91.3 million barrels a day in the first quarter of 2014. This is 0.9 million barrels a day higher than the crude oil demand in the first quarter of 2013.

The global crude oil demand in 2014 is estimated at 92.8 million barrels a day by the IEA. The sum of total non-OPEC and OPEC NGL production in 2014 is now estimated at 62.7 million barrels a day. This leaves the estimated so-called “call on OPEC” for crude oil at 30.0 million barrels a day, which is lower than in 2013. The expected call on OPEC is lower because the estimated growth in non-OPEC production exceeds the expected growth in global demand in 2014.