OPEC: OIL PRICE MOVEMENTS
Oil market highlights
Crude Oil Price Movements
The OPEC Reference Basket fell $4.77 to stand at $95.98/b in September, as sluggish demand and ample supply continue to weight on the oil market. Nymex WTI slipped $3.04/b to $93.03/b in September, while ICE Brent dropped $4.83 to $98.57/b. Speculative net length in ICE Brent was down almost 85% from the peak seen in June 2014. The Brent-WTI spread narrowed to $5.54/b, the lowest since July 2013.
Expectations for world economic growth in 2014 and 2015 remain unchanged at 3.2% and 3.6% respectively, following a re-basing on 2011 purchase power parity. The OECD is seen growing at 1.8% in 2014 and 2.1% in 2015, with the US experiencing a continued acceleration, while growth in the Euro-zone and Japan remains sluggish. China's figures remain unchanged at 7.4% in 2014 and 7.2% next year. Growth in India is also unchanged at 5.5% this year and 5.8% in 2015.
World Oil Demand
Global oil demand growth in 2014 is anticipated to reach around 1.05 mb/d, unchanged from the previous report. Growth this year has been supported by positive performance of China, Brazil and Saudi Arabia, offsetting lower-than-expected growth in some OECD regions. In 2015, world oil demand is forecast to rise by 1.19 mb/d, in line with last month's forecast.
World Oil Supply
Non-OPEC oil supply growth in 2014 is forecast at 1.68 mb/d, in line with the previous report. Growth was seen coming mainly from the US, Brazil and Canada, while Mexico, Indonesia and the UK are expected to see a decline. Non-OPEC supply is expected to increase by 1.24 mb/d in 2015. OPEC NGLs is seen growing by 0.2 mb/d in 2015 to average 6.03 mb/d. In September, OPEC crude production averaged 30.47 mb/d according to secondary sources, an increase of 402 tb/d from the previous month.
Product Markets and Refining Operations
A tightening gasoline market due to several unit outages lent support to crack spreads. This partially offset weaker middle distillates demand, allowing margins to continue the upward trend in the Atlantic Basin. In Asia, strong gasoline and fuel oil demand, along with falling crude prices, allowed margins in the region to recover.
The dirty spot tanker market continued to be under pressure in September. Tankers in different segments showed lower freight rates as tonnage demand remained limited, while availability continued to see a surplus. Clean tanker freight rates improved in September driven by high market activity west of Suez.
OECD commercial oil stocks rose by around 9.0 mb in August to stand at 2,679 mb. At this level, inventories were still 57.0 mb below the five-year average. Crude saw a surplus of 12.0 mb, while product stocks remained 69 mb below the five-year average. In terms of days of forward cover, OECD commercial stocks edged 0.1 day higher in August over the previous month to stand at 57.9 days.
Balance of Supply and Demand
Demand for OPEC crude in 2014 remains unchanged from the previous report at 29.5 mb/d. In 2015, demand for OPEC crude is seen averaging 29.2 mb/d, in line with the previous expectations.
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REUTERS - Brent crude futures LCOc1 were down 72 cents at $61.49 per barrel at 1020 GMT, having fallen by 1.5 percent on Tuesday, its largest one-day drop in a month. U.S. West Texas Intermediate (WTI) crude CLc1 was at $55.12 per barrel, down 58 cents.
BLOOMBERG - Prices dropped during the session as the International Energy Agency said the recent recovery in oil prices, coupled with milder-than-normal winter weather, is slowing demand growth. The worsening outlook for consumption dampened some of the enthusiasm that OPEC and its allies will extend supply curbs.
Global energy needs rise more slowly than in the past but still expand by 30% between today and 2040. This is the equivalent of adding another China and India to today’s global demand.
Product exports have grown significantly over the past several years and are expected to continue to grow as Russian refineries add capacity to produce more high-quality products.