The OPEC Reference Basket rose 2.0% in April to average $51.34/b. Crude oil futures recovered on the high conformity by OPEC and non-OPEC with voluntary production adjustments, and expectations for an extension to year-end; however, upward potential was seen as limited by a resurgence in oil output, particularly in the US. ICE Brent increased 2.4% to $53.82/b and NYMEX WTI rose 2.9% to $51.12/b. The Brent-WTI spread narrowed slightly to $2.70/b, but still kept the arbitrage open for US crude exports. Money manager net long positions rose 30% from end of March until the middle of April, but dropped by the one of largest weekly falls on record in the last week of April.
World Economy
The forecast for global economic growth remains at 3.3% in 2017, compared to growth in 2016 of 3.0%.The recent growth dynamic in the global economy has been confirmed with the exception of the US, which is still expected to rebound in the remainder of the year. While US growth remains at 2.2%, Euro-zone growth in 2017 was revised to 1.7% from 1.6%. Japan’s 2017 growth forecast remains at 1.2%. China’s 2017 growth was also revised higher to 6.5% from 6.3%, while India’s forecast remains at 7.0%. Russia’s and Brazil’s 2017 growth forecasts remain unchanged at 1.2% and 0.5%, respectively.
World Oil Demand
World oil demand in 2016 was revised higher by 65 tb/d to reflect the most recent data. Total world oil demand growth for 2016 stood at 1.44 mb/d to average 95.12 mb/d. For 2017, oil demand growth is anticipated to be around 1.27 mb/d unchanged from the previous report with total oil demand expected at 96.38 mb/d. Non-OECD will continue to lead growth at 1.04 mb/d, while OECD continues to grow albeit at a reduced pace of 0.23 mb/d.
World Oil Supply
Non-OPEC oil supply in 2016 was revised marginally lower due to a downward adjustment in Russian oil supply in 4Q16 to now show a contraction of 0.71 mb/d to average 57.3 mb/d. The forecast for 2017 was revised up by 0.37 mb/d to show growth of 0.95 mb/d, following upward adjustments in all quarters, mostly in the US, to average 58.3 mb/d. The revisions were driven by actual production data for February, as well as higher expectations for the remainder of the year. OPEC NGLs and non-conventional oil production in 2017 was revised up by 40 tb/d to average 6.22 mb/d, representing growth of 0.17 mb/d. In April, OPEC production decreased by 18 tb/d, according to secondary sources, to average 31.73 mb/d.
Product Markets and Refining Operations
Product markets strengthened in April in the Atlantic basin, supported by stronger domestic demand amid higher export opportunities. Lower inflows and heavy refinery maintenance also resulted in a tighter market. The main support came from the gasoline, with US domestic demand recovering in April from the slump suffered during the first quarter amid the shift to summer grades and higher exports to Latin America. Meanwhile, Asia margins continued healthy on the back of firm regional demand at a time of peak maintenance in the region.
Tanker Market
Average tanker spot freight rates fell 0.4% from the month before, despite a stronger VLCC market. VLCC spot freight rates improved, rising by 20% on average, as a result of enhanced activity in the market and a tightening in tonnage supply. Nevertheless, the decline in average dirty spot freight rates was driven by the drop in Suezmax and Aframax freight rates, which ended the month down 8% and 10%, respectively, as tonnage demand for both classes was limited, while tonnage oversupply was dominant.
Stock Movements
Total OECD commercial oil stocks fell in March to stand at 3,013 mb. At this level, OECD commercial oil stocks are 276 mb above the latest five-year average. Crude and products stocks indicated a surplus of around 187 mb and 89 mb above the seasonal norm, respectively. In terms of forward cover, OECD commercial stocks stood at 64.8 days, some 4.8 days higher than the latest five-year average.
Balance of Supply and Demand
Demand for OPEC crude in 2016 now stands at 31.8 mb/d, which is 2.0 mb/d higher than in the previous year. In 2017, demand for OPEC crude is projected at 31.9 mb/d, around 0.2 mb/d higher than last year.
Source: OPEC