The OPEC Reference Basket rose by 2.5% in January to settle at $109.28/b. All Basket components improved with Venezuelan Merey showing the most significant increase. ICE Brent and Nymex WTI also moved higher in January. The WTI front-month improved by 7.5% to average $94.83/b and ICE Brent ended the month at $112.32/b. The agreement in the US averting the fiscal cliff triggered a rally in crude prices, along with improving confidence in the global economy. The increasing optimism about the economic outlook has also stimulated a large wave of speculative buying in the oil futures market. The return of the expanded 400-tb/d Seaway pipeline, open arbitrage to Asia, and production glitches in the North Sea market have also underpinned Nymex WTI and ICE Brent prices.
World economic growth remains unchanged at 3.0% for 2012 and 3.2% for 2013. The weak fourth quarter in the US caused growth to be revised lower to 2.2% in 2012 and 1.8% in 2013. Growth in Japan remains unchanged at 0.7% this year, after an estimated expansion of 2.0% in 2012. The Euro-zone is still forecast to recover to 0.1% from a decline of 0.4% in 2012. China continues to benefit from increasing global trade and is forecast to expand at 8.1% in 2013 and 7.8% in 2012, up 0.1 and 0.2 percentage points, respectively. India’s growth in 2013 has been revised to 6.1% from 6.4%, following growth of 5.5% in 2012. While a tentative recovery in the global economy is visible, a number of fiscal-related issues in the developed countries remain and are likely to impact growth in the coming months.
World oil demand growth in 2012 was revised up by 45 tb/d to stand at 0.8 mb/d, reflecting higher than expected actual data for the fourth quarter. Given some signs of recovery in the global economy and colder weather at the start of this year, the forecast for world oil demand growth in 2013 has also been revised up by 80 tb/d to stand at 0.8 mb/d. The bulk of the growth is seen coming from China, which is forecast to increase by 0.4 mb/d. Other non-OECD countries will add further 0.7 mb/d, while OECD demand is expected to still see a contraction of 0.3 mb/d, although 0.1 mb/d less than estimated in 2012.
Non-OPEC supply is estimated to have increased by 0.5 mb/d in 2012, unchanged from the previous month. In 2013, non-OPEC oil supply is forecast to increase by 0.9 mb/d, unchanged from the previous month. The US, Canada, the Sudans, Brazil, Australia, and Kazakhstan are seen as the major contributors to supply growth in 2013. OPEC NGLs are expected to increase by 0.2 mb/d in 2013, following an estimated increase of 0.4 mb/d in 2012. In January, total OPEC crude oil production averaged 30.32 mb/d, according to secondary sources, representing a decrease of about 20 tb/d from the previous month.
Product markets in January reversed the declining trend seen since October. The gasoline market became temporarily bullish on the back of tightening sentiment with inventories falling in the Atlantic Basin amid healthy cracks in the bottom of the barrel. Additionally, refinery margins in Asia continue to recover, supported by rising seasonal demand in middle distillates and fuel oil for utilities, as well as expectations of tightening product supplies in the region.
The tanker market in January saw a generally lower trend, with both clean and dirty spot freight rates declining partially due to increased new Worldscale flat rates on higher bunker prices. Ample tonnage supply amid lower tonnage demand pressured freight rates. On average, VLCC rates decreased 18%, Suezmax dropped 5%, and Aframax declined 6%. OPEC sailings and fixtures declined in January by 3% and 6.6%, respectively.
Preliminary data for December shows that total OECD commercial oil stocks fell seasonally by 44.1 mb, but remained in line with the five-year average. Commercial crude stocks showed a surplus of 47 mb, while products indicated a deficit of almost the same amount. In terms of forward cover, OECD commercial stocks stood at around 57.2 days at the end of December, one-and-a-half days higher than the five-year average. US total commercial oil stocks rose 13.8 mb in January , showing a surplus of 54.0 mb with the five-year average. The build in total US commercial oil stocks was attributed to both crude and products, which rose by 11.7 mb and 2.1 mb, respectively.
Demand for OPEC crude in 2012 remained unchanged from the previous assessment to stand at 30.1 mb/d, representing a decline of 0.1 mb/d from the previous year. Required OPEC crude for this year is forecast to average 29.8 mb/d, indicating a decline of 0.3 mb/d and representing an upward adjustment of 0.1 mb/d from the previous report.
Source: OPEC