Russia will export about 180,000 b/d more crude in 2016 compared to last year. Exports via pipelines and Far East ports leading directly to Asia will only increase 50,000 b/d, with the remainder of the growth coming in outflows from European ports. Higher exports from European ports will encourage greater outflows of Russian crude from Europe to Asia, intensifying the battle for market share there as well as in Europe.
The ongoing civil war and the rise of ISIS in Libya will carry on for years. Western powers are taking steps consistent with counter-terrorism but not necessarily supportive of reconciliation or the establishment of a functioning government. This means Libya’s crude production will remain constrained by realities on the ground perhaps for years.
A 900,000 b/d drop in non-OPEC crude and condensate production in 2016 will encourage a price rally later this year. If that rally coincides with seasonal summer gasoline strength, then it could be quick and strong. Ample crude and product inventories, however, will temper the duration of the price rally. Even so, the market will return to the 40s in 2016.