Oil Outlook 2016

Although global oil demand growth was exceptional during 2015 at 1.7mn b/d, it began to weaken during the last quarter of the year across all markets with the exception of India and the Middle East. We believe demand will grow by 1.1mn b/d in 2016. Non-OPEC supply grew by 1mn b/d in 2015 thanks to large expansions in US production and increasing production in South America, Europe and Russia. We are less optimistic for 2016 and are expecting a contraction of 660,000 b/d. Despite that, there will be excess supply in the market as OPEC production remains elevated. We expect prices to bottom out in the first quarter of 2016 before recovering slowly during the year in our base case scenario. However prices are likely to remained capped in the near term