The OPEC Reference Basket averaged $104.45/b in July, representing a gain of $3.42/b over the previous month. The increase came mainly from Brent-related North African grades, as well as Middle Eastern crudes. The Nymex WTI front-month contract gained a hefty $8.90/b in July to average $104.70/b. Positive US economic data coupled with US crude inventory draws attracted speculative flows back into the US crude futures market. Managed money net long positions rose to the highest level since the CFTC began publishing weekly disaggregated data in September 2009.
ICE Brent was supported by supply disruptions, although the upward price trend was partly offset by higher US shale supplies and worries about weaker Chinese demand.
World economic growth for 2013 has been revised down to 2.9% from 3.0%, mainly due to lower GDP growth estimates for the US in the first quarter, as well as the slowdown in China’s economy.
The 2014 global growth forecast remains unchanged at 3.5%. US growth in 2013 has been revised down by 0.2 percentage points (pp) to 1.6% and remains at 2.5% in 2014. The forecasts for the Euro-zone remain unchanged, with a contraction of 0.6% expected this year and growth of 0.6% in 2014. Japan’s growth for this year has been revised up to 1.9% from 1.8%, given the continued momentum, but is still expected to slow to 1.4% in 2014. India and China are currently impacted by decelerating total investments and declining exports. Growth for China has been revised from 7.7% to 7.6% this year and remains at 7.7% in 2014. India’s 2013 and 2014 growth expectations are
unchanged at 5.6% and 6.0%, respectively.
World oil demand growth in 2013 was revised marginally higher to stand at 0.8 mb/d. The revision is based on actual and preliminary data for the first half of the year, due to adjustments to all of the OECD regions, as well as some in the non-OECD, especially Latin America and Other Asia. The forecast for global oil demand growth in 2014 remains unchanged at 1.04 mb/d. Non-OECD countries are projected to increase by 1.2 mb/d, while OECD is expected to see lower contraction at 0.2 mb/d compared to the current year.
Non-OPEC supply is expected to rise by 1.0 mb/d in 2013, following a minor upward revision, mainly due to historical revisions, as well as higher-than-expected US output. In 2014, non-OPEC oil supply is forecast to grow by 1.1 mb/d, supported by projected increases in the US, Canada, Brazil, the Sudans, and Kazakhstan. OPEC NGLs and nonconventional oils are projected to increase by 0.2 mb/d in 2013 and 0.1 mb/d in 2014. In July, total OPEC crude oil output averaged 30.31 mb/d, according to secondary sources, representing a drop of 0.10 mb/d from the previous month.
Product markets exhibited a mixed performance in July. In Asia, refinery margins remained
relatively healthy as cracks strengthening across the top and middle of the barrel, supported by the strong regional seasonal demand. In contrast, refinery margins in the Atlantic Basin fell pressured by development in the crude markets. The bottom of the barrel crack spread suffered a sharp drop across the global, caused by weaker demand in both the bunker and power sectors.
In the tanker market, OPEC spot fixtures in July averaged 14.35 mb/d and OPEC sailings stood at 24.36 mb/d. Arrivals at most reported routes increased, except in west Asia which declined by 3%. Dirty tankers spot freight rates increased on higher activity and tighter tonnage availability for certain dates, as well as various port delays. Suezmax experienced the highest gains. Clean spot freight rates were mixed, with east of Suez spot freight rates down 12%, while west of Suez rates increased by 8% from a month ago.
Total OECD commercial oil stocks rose by 13 mb in June for the fourth consecutive month, but remained slightly below the five-year average. Crude stocks were in line with the five-year average, while product inventories showed a deficit of 6.4 mb with the seasonal average. In term of forward cover, OECD commercial stocks stood at 59.1 days, 1.2 days more than the five-year average.
Preliminary data for July showed US total commercial oil stocks fell by 8.1 mb, reversing the build of the last fourth months, but still representing a surplus of 29.7 mb with the five-year average. Crude and products showed a surplus of 21.9 mb and 7.8 mb, respectively.
The demand for OPEC crude in 2013 is forecast to average 29.9 mb/d, almost unchanged from the previous report and 0.4 mb/d lower than in the year before. In 2014, demand for OPEC crude has experienced a slight change since the previous report to stand at 29.7 mb/d. This represents a decline of 0.3 mb/d compared to the year before.
Source: OPEC