Crude Oil Price Movements The OPEC Reference Basket (ORB) fell m-o-m by $1.70, or 1.8%, in October to average $93.62/b. The ICE Brent front-month rose $3.02, or 3.3%, to average $93.59/b, while NYMEX WTI increased by $3.23, or 3.9%, to average $87.03/b. The Brent/WTI futures spread narrowed m-o-m, contracting by 21¢ to average $6.56/b. The market structure of ICE Brent and NYMEX WTI strengthened and the first-to-third month spreads moved into stronger backwardation. The combined futures and options net long positions of hedge funds and other money managers increased in both ICE Brent and NYMEX WTI.
World Economy
The world economic growth forecast for 2022 and 2023 remains unchanged at 2.7% and 2.5%, respectively. This reflects the uncertainties that might affect GDP growth in 4Q22 and subsequent quarters. For the US, GDP growth in 2022 remained at 1.5%, while the forecast for 2023 is unchanged at 0.8%. Euro-zone economic growth for 2022 and 2023 are also unchanged at 3.0% and 0.3%, respectively. Japan’s economic growth forecast remains at 1.5% for 2022 and 1% for 2023. China’s 2022 growth forecast is unchanged at 3.1% for 2022 and 4.8% for 2023. The forecast for India is in line with the previous assessment for both 2022 and 2023 at 6.5% and 5.6%, respectively. Similarly, Brazil’s economic growth forecast is unchanged at 1.5% for 2022 and 1% for 2023. Russia’s GDP contraction in 2022 is estimated at 5.7%, followed by a growth of 0.2% in 2023, unchanged from last month’s assessment. The global growth has clearly entered into a period of significant uncertainty and mounting challenges. This includes high inflation levels and the consequences of monetary tightening by major central banks, high sovereign debt levels in many regions and ongoing supply chain issues. Moreover, geopolitical risks persist and developments related to the COVID-19 pandemic, mainly in the Northern Hemisphere and China, remain a key uncertainty.
World Oil Demand
The world oil demand growth forecast for 2022 is revised down by 0.1 mb/d to now stand at 2.5 mb/d. Oil demand in the OECD is estimated to increase by around 1.3 mb/d, while the non-OECD is seen growing by about 1.3 mb/d. The second quarter of this year was revised slightly higher amid better-than-anticipated oil demand in the main OECD consuming countries. However, oil demand in 3Q22 and 4Q22 is revised lower due to the zero-COVID-19 policy in China, ongoing geopolitical uncertainties and weaker economic activities. For 2023, the global oil demand growth forecast is revised down by 0.1 mb/d from the previous assessment to stand at 2.2 mb/d. The OECD is expected to grow by 0.3 mb/d and the non-OECD by 1.9 mb/d. Oil demand growth is anticipated to be challenged by uncertainties related to economic activities, COVID-19 containment measures and geopolitical developments.
World Oil Supply
Non-OPEC liquids supply is forecast to grow by 1.9 mb/d in 2022, following a slight downward revision of 30 tb/d compared with the previous assessment. An upward revision to Latin America and Russia liquids production was more than offset by downward revisions to Other Eurasia, OECD Europe and Other Asia. The main drivers of liquids supply growth for 2022 are expected to be the US, Canada, Guyana, China and Brazil, while Norway and Thailand are set to contribute the largest declines. For 2023, the forecast for non-OPEC liquids supply growth remains broadly unchanged at 1.5 mb/d. The main drivers are expected to be the US, Norway, Brazil, Canada, Kazakhstan and Guyana, whereas oil production is forecast to decline primarily in Russia and Mexico. Nevertheless, considerable uncertainties persist regarding the potential for US shale production and the geopolitical situation in Eastern Europe, including the looming EU sanctions on imports of Russian oil. OPEC NGLs and non-conventional liquids are forecast to grow by 0.1 mb/d in 2022 to average 5.39 mb/d and in 2023 by 50 tb/d to average 5.44 mb/d. OPEC-13 crude oil production in October decreased by 210 tb/d m-o-m to average 29.49 mb/d, according to available secondary sources.
Product Markets and Refining Operations Refinery margins increased globally in October and showed solid gains in line with market expectations and historic seasonal trends. This was the result of a significant reduction in refinery product output as maintenance interventions further intensified in the West and offline capacities reached a peak in October. The resulting contraction of product balances in the Atlantic Basin provided a profitable environment for Asia to capitalize on product exports that ultimately supported their refining economics too, although the gains in Asia were more limited. Over the month, global refinery processing rates declined further, in line with historical trends, dropping 960 tb/d in response to a rise in offline capacity amid peak autumn maintenance works. In the coming month, refinery intakes are expected to reverse course and recover. This will add nearly 1.5 mb/d m-o-m, according to preliminary data, as major turnarounds come to an end. The need to restock diesel inventories, mainly in the West, should lend further support.
Tanker Market
Dirty spot freight rates moved higher in October, with m-o-m gains seen on almost all major routes. Spot VLCC rates on the Middle East-to-East route rose 8%, while on the West Africa-to-East route they gained 10%. Rates on the midsize Suezmax and Aframax routes were broadly higher. Suezmax rates on the US Gulf Coast (USGC)-to-Europe route rose 16%, while Aframax spot rates on the Cross-Med route increased 30%. Only Aframax rates on the Indonesia-to-East route saw a decline, falling 11%. All monitored routes were well above the levels seen in the same month last year. Clean rates saw diverging trends, with losses East of Suez outweighing gains West of Suez. On the Middle East-to-East route, clean spot rates fell 38% m-o-m in October.
Crude and Refined Products Trade
Preliminary data show US crude imports fell to a six-month low in October at an average of 6.1 mb/d, while US crude exports remained close to record high levels at an average of 4.0 mb/d. US product imports recovered from the previous month’s decline, while product exports fell back from the strong September levels to average 6.1 mb/d. Preliminary estimates show OECD Europe’s crude imports have averaged around 9 mb/d over the last three months. Product imports into OECD Europe have risen gradually since August, amid higher flows from the Middle East and India. Japan’s crude imports in September fell back from an over two-year high to average 2.8 mb/d, although flows still registered the 14th-month of consecutive y-o-y gains. Japan’s product exports increased further in September, reaching the highest monthly figure since February. China’s crude imports continued to recover in September, averaging 9.8 mb/d. Gains came as Chinese refiners began to boost product exports, particularly gasoil, amid tight regional demand and the availability of product export quotas. China’s product imports jumped 26% on the back of higher inflows of LPG. Recently released October data shows China’s crude imports increased to 10.2 mb/d, while product exports fell 21% amid improved domestic demand. India’s crude imports continued to decline in September, reaching an 11-month low of 4.0 mb/d. This broke a seven consecutive months of y-o-y gains. India’s product imports and exports were broadly stable m-o-m in September.
Commercial Stock Movements
Preliminary September data shows total OECD commercial oil stocks up 13.4 mb m-o-m. At 2,749 mb, inventories were 21 mb less than the same month a year ago, 198 mb lower than the latest five-year average and 218 mb below the 2015–2019 average. Within components, crude and product stocks rose 6.5 mb and 6.8 mb, respectively, compared with the previous month. At 1,335 mb, OECD crude stocks were 36 mb higher than the same month last year, 70 mb below the latest five-year average and 100 mb lower than the 2015–2019 average. OECD product stocks stood at 1,414 mb, representing a m-o-m deficit of 56 mb. This was 128 mb lower than the latest five-year average and 118 mb below the 2015–2019 average. In terms of days of forward cover, OECD commercial stocks remained unchanged m-o-m in September to stand at 58.4 days. This is 0.8 days below September 2021 levels, 5.0 days less than the latest five-year average and 4.1 days lower than the 2015–2019 average.
Balance of Supply and Demand
Demand for OPEC crude in 2022 is revised down by 0.1 mb/d from the previous month’s assessment to stand at 28.6 mb/d, which is around 0.5 mb/d higher than in 2021. Demand for OPEC crude in 2023 is also revised down by 0.2 mb/d from the previous month’s assessment to stand at 29.3 mb/d, which is 0.7 mb/d higher than in 2022.
Source: OPEC