Crude Oil Price Movements
The OPEC Reference Basket increased by $2.63 to average $45.84/b in June. ICE Brent ended up $2.28 at $49.93/b and NYMEX WTI gained $2.06 to stand at $48.85/b. Speculators cut net long positions further this month in all markets. The ICE Brent-WTI spread widened to $1.07/b in June, up from 85¢/b in the previous month.
World Economy
World economic growth for this year was revised down to 3.0% from 3.1%, considering potential economic impacts from the UK’s vote to leave the EU. Global growth for 2017 is forecast at 3.1%. OECD growth has been reduced to 1.8% from 1.9% for 2016 and stands at 1.7% in 2017. The 2016 forecasts for the major emerging economies remain broadly unchanged. China and India are seen expanding this year at 6.5% and 7.5%, respectively, and growth is forecast to slow slightly to 6.1% and 7.2% in 2017. Brazil and Russia are forecast to rebound from a two-year recession and grow by 0.4% and 0.7% in 2017.
World Oil Demand
World oil demand growth in 2016 is expected to be around 1.2 mb/d, broadly unchanged from the previous report to average 94.2 mb/d. The initial forecast for world oil demand growth in 2017 stands at 1.2 mb/d to average 95.3 mb/d. The bulk of growth is projected to originate in the non-OECD, which is expected to contribute 1.1 mb/d, although OECD demand will remain in positive territory at 0.1 mb/d.
World Oil Supply
Non-OPEC oil supply in 2016 is forecast to show a stronger contraction of 0.9 mb/d, following a downward revision of 0.1 mb/d since the last report, to average 56.0 mb/d. This is mainly due to lower oil output from Canada in 2Q16 due to the wildfire, as well as from the US. Non-OPEC oil supply in 2017 is projected to decline by 0.1 mb/d to average 55.9 mb/d. Brazil and Canada are the main drivers of growth next year while Mexico, the US, and Norway are expected to see declines. OPEC NGLs are expected to grow by 0.15 mb/d in 2017. In June, OPEC-14 crude production increased by 264 tb/d to average 32.86 mb/d, according to secondary sources.
Product Markets and Refining Operations
Higher export opportunities amid lower inflows of middle distillates and fuel oil have eased the oversupply environment in the Atlantic Basin. This has allowed refinery margins to strengthen slightly, despite gasoline being impacted by regional oversupply. Meanwhile, refinery margins in Asia fell as the weakness seen at the top of the barrel outweighed strong regional gasoil and fuel oil demand, which have been boosted by power generation requirements.
Tanker Market
Dirty tanker spot freight rates declined on average in June. This was mainly on the back of the continued decline in VLCC rates on all reported routes. Suexmax spot freight rates were supported by a strengthening market in West Africa on occasional tightness in vessel availability. Aframax freight rates were flat from the month before, suffering from limited activity and maintenance work at some ports.
Stock Movements
OECD commercial oil stocks fell in May to stand at 3,063 mb. At this level, OECD commercial oil stocks are around 329 mb above the five-year average, with crude and products indicating a surplus of 199 mb and 130 mb, respectively. In terms of days of forward cover, OECD commercial stocks stood at 65.9 days, some 6.7 days higher than the five-year average.
Balance of Supply and Demand
Demand for OPEC crude in 2016 is expected to average 31.9 mb/d, an increase of 1.9 mb/d over the previous year. In 2017, the demand for OPEC crude is projected at 33.0 mb/d, a gain of 1.1 mb/d over the current year.
Source: OPEC