The latest OPEC monthly oil market report made marginal revisions to its demand-supply growth forecasts for 2013. Both global oil demand growth and non-OPEC supply growth were trimmed slightly by 40 thousand b/d each, placing the Secretariat’s call on its crude this year unchanged at 29.7 mb/d.While this represents a decline of 0.4 mb/d from the call on crude in 2012, it remains close to the Secretariat’s target ceiling of 30 mb/d.Current output levels are also falling close to these numbers, with OPEC production in March (secondary sources) estimated at 30.2 mb/d, showing a further m/m decline. In Barclays' view, the adjustment in OPEC supplies over recent months consists broadly of the following three elements:
a) Supply outages in Nigeria (floods, oil thefts), Libya (strikes), Iraq (weather, and limited exports from Kurdistan).
Outlook: Barclays expects a moderate recovery in volumes from these supply centres over Q2 as these temporary problems recede, although they continue to highlight the potential for further variability given the nature and underlying reasons for these disruptions.
b) Broadening radius of sanctions on Iran continuing to weigh on its oil exports.
Outlook: Given the current geopolitical context, Barclays' base-case scenario does not include a recovery in volumes from this supply centre in Q2.
c) Matching market requirements
Although the above mentioned outages have weighed on some suppliers among OPEC, holders of spare capacity have chosen to maintain production levels and in some cases adjust it lower, rather than ramp up supplies, because of the lower call on prompt crude seen in Q1.
A fair degree of refinery maintenance globally over Q1 has meant that the call for prompt cargoes was relatively limited, helping to boost available spare capacity among OPEC suppliers.
Outlook: Barclays expects these OPEC suppliers with access to spare capacity to step up output fairly easily to meet market requirements, as refineries return from maintenance by the tail end of Q2.
Overall, OPEC supplies climbing down from their peak has helped increase spare capacity to roughly 2.7 mb/d, in our view. Although, this still does not represent the comfort zone of 5%, it does represent a much larger figure than last year, when key suppliers were stretching themselves to balance the market.
North American refineries have largely reached the tail end of the maintenance season (with local crude grades getting well bid in response to refineries coming back online).
However, East of Suez, April continues to see a record amount of refinery capacity offline (close to 3 mb/d), which will continue to weigh on demand for prompt crude. However, towards the end of Q2, once these refineries return from maintenance, we expect a strong call at the prompt for crude with OPEC well poised to meet this requirement, and we maintain our call on OPEC crude for Q2 at 30.4 mb/d.
Source: Barclays