The OPEC Reference Basket continued its upward movement in August to settle at $109.52/b, pushed higher by the market’s bullish sentiment. Basket components rose by $8.00-1200. ICE Brent front-month prices also increased in August by 10% to settle at $112.68/b, while Nymex WTI rose by 7% to stand at $94.16/b. The return of significantly higher speculative activity, constraints in North Sea supply, declines in crude oil stockpiles in the US, hopes for further monetary easing from major central banks, and geopolitical factors have all contributed to the increase in crude oil prices.
Oil markets were also supported by unexpected positive economic data from the US. Weatherrelated factors pushed prices higher, as Hurricane Isaac threatened oil operations in the US Gulf. On 10 September, the OPEC Basket stood at $112.32/b.
§Growth expectations for the world economy in 2012 and 2013 remain unchanged at 3.3% and 3.2%, respectively. The US is forecast to grow by 2.3% in 2012 and 2.0% in 2013. Japan is expected to decelerate from 2.7% this year to 1.2% in 2013. The Euro-zone is seen returning to growth of 0.1%, following a contraction of 0.4% in 2012. Growth expectations for China stand at 8.1% for 2012 and 8.0% in 2013, while India’s expansion is forecast at 6.3% in 2012 and 6.6% in 2013.
§World oil demand growth in 2012 is forecast at 0.9 mb/d, unchanged from the previous report.
Global economic turbulence has not slowed oil consumption seasonality from its summer trend.
World oil demand rose in July, leading to growth of 1.1 mb/d in the third quarter y-o-y. Non-OECD consumed 42.9 mb/d of oil in July, an increase of 1.0 mb/d y-o-y. In 2013, world oil demand is forecast to grow at a slightly lower 0.8 mb/d compared to the previous year. Downside risk exists as the economic slowdown in the developed countries could increasingly spill over into the non-OECD.
§Non-OPEC supply is anticipated to increase by 0.7 mb/d in 2012. Growth is supported by expected gains in the US, Canada, Brazil, Russia, China, and Colombia, while output from South Sudan and Sudan, Syria, the UK and Norway is projected to decline. In 2013, non-OPEC oil supply is forecast to grow by 0.9 mb/d. OPEC NGLs and non-conventional oils are expected to average 5.7 mb/d in 2012 and 5.9 mb/d in 2013, representing growth of 0.4 mb/d and 0.2 mb/d, respectively. In August, OPEC crude oil production stood at 31.41 mb/d, representing an increase of 254 tb/d from the previous month, according to secondary sources.
§Product market sentiment remained healthy and became stronger worldwide in August, with light distillates exhibiting a positive performance on the back of tightening downstream supply generated by the shutdown of several refineries worldwide and the recovery in gasoline demand in the Atlantic Basin, as well as naphtha consumption in the petrochemical sector in Asia. The positive performance of light distillates allowed margins to continue increasing, despite weaker fuel oil demand.
§ In the tanker market, a general negative trend was affecting dirty tankers, as lower tonnage demand and ample vessel supply drove spot freight rates to lower levels. The VLCC and Aframax markets saw slow activities, while Suezmax freight rates in August reached the lowest level this year. Clean tanker spot freight rates rose in the west and declined in the east. Sailings from OPEC were almost steady in August to average 24 mb/d. Arrivals in North America, Europe and West Asia increased, while in the Far East arrivals declined. Both global and OPEC spot fixtures decreased in August from the previous month by 3.4 mb/d and 1.0 mb/d, respectively.
§US commercial oil inventories fell for the second consecutive month in August, declining by 13.3 mb. This drop was attributed solely to crude stocks, which fell by 16.5 mb, while product inventories rose by 2.9 mb. Despite the drop, US commercial stocks remained 17.2 mb above the five-year average. The most recent monthly data for Japan shows that commercial oil inventories rose by 0.9 mb in July for the fifth consecutive month, driven by an increase in products of 3.0 mb. Crude stocks limited the build, dropping by 2.2 mb. Japan’s commercial inventories remain 2.8 mb below the five-year average.
§Demand for OPEC crude for 2012 has remained virtually unchanged from the previous assessment to stand at 29.9 mb/d. This represents a decline of 0.2 mb/d from the previous year.
Demand for OPEC crude in 2013 is projected to average 29.5 mb/d, also unchanged from the previous report and 0.4 mb/d lower than the 2012 level.
Source: OPEC