Jadwa lowers Saudi 2019 oil output forecast to 10.3 mbd

Jadwa Investment has lowered its Saudi oil production forecast to around 10.3 million barrels per day (mbd) for 2019 from its previous estimate of 10.5 mbd, it said in a report on Monday.

The lower production forecast is driven by factors such as the OPEC+ agreement to cut oil production by 1.2 mbd during the first half of the year, lower domestic oil and refined products consumption and higher gas output with the startup of Jazan mega refinery.

"The Fadhili gas complex, which will process 2.5 billion cubic feet per day of raw gas from onshore and offshore fields, is expected to come on-line during 2019. Since most Saudi petrochemical companies’ gas allocations have already been finalized, we believe the additional gas from Fadhili will be used in generating electricity, hence freeing up even more oil," the report said.

While Saudi crude oil production totaled 10.6 mbd in October 2018,  the Kingdom's Energy Minister Khalid Al-Falih has recently said that the oil exports will come down to around 7.2 mbd in most of Q1 2019, compared to 7.7 mbd in October.

Meanwhile, OPEC data shows that while Q4 2018 oil output was flat quarter-on-quarter, there was a sizable decline in output in December, by 750,000  barrels per day month-on-month.

"During the remainder of Q1 2019, we expect a gradual lift in prices as OPEC data confirms compliance to the agreement and OECD oil stocks begin to fall to lower than the five-year average," Jadwa said.

"Later in the year, we expect markets to remain fairly balanced due to a combination of waivers expiring for importers of Iranian oil, and because of a roll-over of the OPEC+ agreement into H2 2019."

The consultancy has lowered Brent price forecast to $66 a barrel for 2019 from its previous estimate of $75 a barrel.