The OPEC Reference Basket retreated by more than 5% in March to average $106.44/b. All Basket component values contributed to the decline, particularly Dated Brent-related crudes. On the ICE exchange, the Brent front-month decreased by almost 5.6% or $6.53 to average $109.54/b. On the Nymex, the WTI front-month dropped by about 2.5% or $2.36/b, to average $92.56/b. Reduced refinery demand due to substantial maintenance worldwide was a key in pushing prices lower. This, coupled with renewed Euro-zone fears, was sufficient to shave off more than 5% of ICE Brent’s value. WTI managed to cap losses partly due to some indications that the US is on a faster path to economic recovery. Additionally, with more routes available to carry crude south to the US Gulf coast, the build-up of crude in the US midcontinent has begun to ease, reducing one of the downward factors weighing on WTI prices.
World economic growth is forecast at 3.2% for 2013 and estimated at 3.0% for 2012, unchanged from the previous month. The recovery in the housing and labour markets has triggered a revision in the forecast for US GDP growth to 1.8% from 1.7%. While Japan’s forecast remains at 0.8%, the effect of the recently announced monetary stimulus will require close monitoring. The contraction in Euro-zone growth has been revised to minus 0.5% from minus 0.2%. China continues to benefit from the rebound in global trade and is forecast to grow by 8.1% in 2013. India’s forecast remains unchanged at 6.0%.
World oil demand growth in 2012 remained broadly unchanged from the previous report at
0.8 mb/d. This was despite a downward revision in the fourth quarter due to the release of actual data. In 2013, world oil demand growth has been revised down slightly by 40 tb/d to stand at 0.8 mb/d. The bulk of the growth is expected to come from China, where demand is seen increasing by 0.4 mb/d. Other non-OECD countries are expected to add another 0.7 mb/d, while OECD demand is forecast to see a slightly lower contraction of 0.3 mb/d compared to the previous year.
Non-OPEC oil supply is forecast to grow by 1.0 mb/d in 2013, a downward revision of 40 tb/d from the previous month. Historical revisions and updated production data were behind the adjustment. Anticipated growth continues to be driven by the US, Canada, Brazil, Russia, Malaysia, Colombia, South Sudan, and China, while Norway, Azerbaijan, Indonesia, and Syria will see declines. OPEC natural gas liquids (NGLs) and non-conventional oils are forecast to increase by 0.2 mb/d in 2013 to average 6.0 mb/d. According to preliminary data from secondary sources, total OPEC crude production in March averaged 30.19 mb/d, a decrease of 100 tb/d from the previous month.
Product markets turned bearish in March, losing the ground gained in the previous months. Light and middle distillate cracks declined, under pressure from weak global demand and increasing supplies, despite the on-going maintenance season. The downside to margins should be limited in the coming months as preparations begin for the start of the summer season.
OPEC spot fixtures were higher in March compared to the previous month, averaging 12.81 mb/d. OPEC sailings also saw a marginal increase to average 23.82 mb/d. Arrivals on most reported routes increased, except in West Asia which declined 3%. Dirty tankers spot freight rates for different segments edged higher on the back of increased activity and tighter tonnage availability for certain dates. Clean spot freight rates were mixed. East of Suez saw a notable increase over the previous month, while West of Suez activities declined along with freight rates.
OECD commercial oil stocks fell seasonally by around 34 mb in February, representing a slight deficit of 8.1 mb with the five-year average. Crude inventories stood 23.6 mb higher than the fiveyear average, while products indicated a deficit of almost 25.0 mb. In terms of forward cover, OECD commercial stocks stood at 59.2 days, nearly two days more than the five-year average. In March, US commercial stocks fell 9.1 mb, but continued to show a surplus of 33.0 mb with the seasonal average. The drop was attributed to products as crude showed an increase.
Demand for OPEC crude in 2012 experienced an upward revision to stand at 30.2 mb/d, although still showing a decline of 0.1 mb/d compared to the previous year. Required OPEC crude for 2013 remains unchanged at 29.7 mb/d, representing a decline of 0.4 mb/d from the previous year.
Source: OPEC