Oil and gas activities, international market conditions (discontinued), Q2 2014

Brent Blend

The average Brent Blend crude price in the 2nd quarter of 2014 was USD 109.7/bbl compared to USD 107.9/bbl in the 1st quarter.

The Brent Blend was traded in the USD 104.8-115.1/bbl range during the 2nd quarter of 2014. The lowest price was traded on 4 April and the highest price was traded on 19 June.

From 28 March to 2 April, the crude oil price decreased by USD 3.3/bbl to USD 104.8/bbl. Increased expectation for the recovery of Libyan crude oil production was the main reason for the decrease.

The oil price then turned and increased to USD 110.3/bbl on 24 April. Increased geopolitical uncertainty was considered by market participants to be more important than the fundamental realities in the oil market, which showed that the market was well supplied with crude oil. The tension between Russia and Ukraine continued, and the EU and USA stepped up their sanctions. The market participants feared that an escalation in the tension between Russia and the EU/USA would result in disruption in the Russian oil supply. The expectations of a recovered Libyan crude oil production were not met. The unrest in North Iraq contributed to lower oil exports from this region.

The average Brent Blend crude price in April was USD 108.1/bbl.

After a month of volatile prices in April, the crude prices stabilised on a slightly higher level. The average crude price in May came to USD 109/bbl. The increased oil price was due to increased demand for oil and an escalation of the uprising in East Ukraine. Increased unrest in Libya also contributed to decreased expectation for an approaching recovery in the crude production in the country.

From 10 June to 19 June, the crude oil price increased by USD 6.2/bbl to USD 115.1/bbl. The militant group, ISIS, The Islamic State of Iraq and greater Syria, rapidly gained ground in Iraq and was approaching Bagdad. The military situation in Iraq in the middle of June was difficult to follow. Oil market participants feared that the crude oil production in South Iraq was in jeopardy. When the Iraqi army later in June stopped ISIS`s military advance, the crude price lost some of its earlier gain.

As yet in the 3rd quarter, the Brent Blend price has fallen significantly. From 1 July to 14 August, the crude oil price decreased by USD 10.3/bbl to USD 102/bbl. The oil demand has been lower than usual in the summer. This has resulted in a plentiful supplied oil market. In addition, the US air strikes in North Iraq have reduced the risk for disruption in Iraqi crude oil exports.

The average crude price in July was USD 108.2/bbl.

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 92.6 million barrels a day in the 2nd quarter of 2014. This is an increase of 1.3 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 91.7 million barrels a day in the 2nd quarter of 2014. This is 0.7 million barrels a day higher than the crude oil demand in the first quarter of 2013.

The global crude oil demand in 2014 is now estimated at 92.7 million barrels a day by the IEA.

The sum of total non-OPEC and OPEC NGL production in 2014 is now estimated at 62.6 million barrels a day. This leaves the estimated “call on OPEC” for crude oil at 30.0 million barrels a day, which is lower than in 2013.

The global crude oil demand in 2015 is estimated at 94 million barrels a day by the IEA. The sum of total non-OPEC and OPEC NGL production in 2014 is now estimated at 64.2 million barrels a day. This leaves the estimated “call on OPEC” for crude oil at 29.9 million barrels a day in 2015.