The OPEC Reference Basket rose for the fourth consecutive month in September, increasing by $1.21/b to average $108.73/b. Crude oil futures prices began the month with some upward momentum fuelled by supply outages and a spike in geopolitical tensions. However, with the easing of geopolitical concerns, oil prices on both sides of the Atlantic began to drop steadily, shedding some $8/b. An improvement in supply prospects from the MENA region and Sudan, along with assurances by major suppliers and international oil agencies that the market was well-supplied, also dampened the upward pressure on crude oil prices. As the rally in the crude futures market came to end, money managers sharply reduced their record-high net length positions at the end of September. On the Nymex, the front-month WTI contract fell 30¢ to $106.24 in September, while ICE Brent improved slightly to average $111.25/b.

World economic growth for 2013 and 2014 remains unchanged at 2.9% and 3.5% respectively, although ongoing developments regarding the budget stand-off in the US requires close monitoring. US growth for 2013 has been revised down to 1.6% from 1.7%, while the 2014 forecast remains at 2.5%. The Euro-zone growth forecast for the current year has been revised up to -0.3% from -0.5% and to 0.7% from 0.6% for 2014. Japan’s forecast for 2013 has been revised up to 1.9% from 1.7% and growth for 2014 has been revised to 1.5% from 1.4%. India has been impacted by capital outflows and its 2013 forecast has been lowered to 5.0% and its 2014 forecast reduced to 5.8%. China’s growth expectations remain unchanged at 7.6% and 7.7% for 2013 and 2014, respectively.

World oil demand is estimated to average 89.7 mb/d in 2013, representing growth of 0.8 mb/d
compared to the previous year, and unchanged from the previous report. Upward revisions in OECD Americas and Europe were almost entirely offset by downward adjustments in OECD Asia Pacific, Other Asia and the FSU. For 2014, growth is expected to increase to around 1.0 mb/d to reach to 90.8 mb/d. Non-OECD countries are projected to lead oil demand growth with 1.2 mb/d, while OECD consumption is seen continuing to decline but at a lower rate of 0.2 mb/d.

Non-OPEC oil supply is estimated at 54.1 mb/d, following an upward revision of 0.1 mb/d, representing growth of 1.1 mb/d. The upward adjustment was due mainly to higher-than-expected supply from the US, Brazil, Kazakhstan and South Sudan & Sudan. In 2014, non-OPEC oil supply is expected to increase by 1.2 mb/d, supported by anticipated growth in the US, Canada, Brazil, and South Sudan & Sudan. OPEC NGLs and nonconventional oils are expected to increase by 0.2 mb/d in 2013 and 0.1 mb/d in 2014. In September, total OPEC crude production averaged 30.05 mb/d, according to secondary sources, representing a drop of 390 tb/d from the previous month.

Product market sentiment showed a mixed performance in September. Middle distillates remained relatively healthy on the back of tightening sentiment. In contrast, gasoline plummeted with the winding down of the driving season in the Atlantic basin, as well as declining seasonal demand in Asia countries. Combined with a weakening fuel oil market sentiment, this caused refinery margins to continue their worldwide downward trend.

Bearish sentiment continued to dominate the crude oil tanker market in September, despite VLCCs registering only a slight rate increase from last month. Freight rates remain largely under pressure due mainly to high tonnage availability and limited demand. Suezmax and Aframax freight rates were lower in September due to a lack of tonnage demand. Clean tanker rates were mixed. In September, OPEC spot fixtures rose to average 13.21 mb/d, mainly due to increased Middle East-to-East fixtures.

Total OECD commercial oil stocks fell by 10.0 mb in August to show a deficit of around 68 mb with the five-year average, divided between crude and products. In terms of forward cover, OECD commercial stocks stood at 58.6 days, a surplus of 0.1 days compared to the five-year average. Preliminary data for September shows US commercial oil stocks rose 4.5 mb – reversing the drop of last two months – to indicate a surplus of 33.0 mb with the five-year average. This gain was divided between crude and products, which indicated surpluses of 23.7 mb and 9.2 mb, respectively.

Demand for OPEC crude in 2013 is estimated to average 29.9 mb/d, unchanged from the previous report, representing a decline of 0.5 mb/d from 2012. In 2014, demand for OPEC crude is expected at 29.6 mb/d, also in line with the previous report, representing a decline of 0.3 mb/d compared to the current year.
Source: OPEC