OPEC: GROWTH REMAINS UNCHANGED
Oil market highlights
The slow and uneven global recovery continues, leaving the GDP growth forecast unchanged at 3.1% for 2014 and 3.4% for 2015. A significantly positive revision of the US 1Q14 GDP decline and the announcement of strong growth in 2Q14 of 4.0%, led to an upward revision for US 2014 growth from 1.6% to 2.0%, while the forecast for 2015 remains unchanged at 2.6%. In Japan 2014 growth has been revised down from 1.5% to 1.4%, given a larger-than-expected drag from the April’s sales tax increase. Taking this into consideration, the OECD forecast for 2014 was revised up from 1.7% to 1.8%. In emerging markets, mainly Latin American economies have been revised down, with Brazil’s forecast now standing at 1.5% for 2014, compared to 1.6% in the past month. The current growth forecast accommodates continued fragility in the global growth development, given some uncertainty about the dynamic of US growth, ongoing fragility in the Euro-zone, Japan aiming for fiscal tightening and also the nearterm development in EMs as well as geo-political developments, will all need close monitoring.
World Oil Demand
The forecast for 2014 world oil demand was fairly unchanged from last month's report. Global oil demand growth for 2014 now stands at 1.10 mb/d after a marginal downward revision of 25 tb/d due to a lower-than-expected performance in 2Q14 from OECD Americas, mainly Canada and Mexico, as well as from OECD Europe and Asia Pacific. In 2015, world oil demand is projected to grow by 1.21 mb/d, unchanged from the previous report.
World Oil Supply
Non-OPEC oil supply is estimated to have averaged 55.69 mb/d in 2014, an increase of 1.50 mb/d over one year earlier, indicating an upward revision of 30 tb/d from the previous Monthly Oil Market Report (MOMR). OECD Americas was expected to be the main driver for growth in 2014. Non-OPEC oil supply is projected to grow by 1.27 mb/d in 2015 — down by 50 tb/d from the previous assessment — to average 56.96 mb/d, as the base changed. OPEC NGLs and non-conventional liquids grew by 150 tb/d to average 5.81 mb/d in 2014 and are forecast to grow by 0.2 mb/d to average 6.01 mb/d in 2015. In July 2014, OPEC crude oil production increased by 167 tb/d to average 29.91 mb/d, according to secondary sources. As a result, preliminary data indicates that world oil supply increased by 0.08 mb/d in July to average 90.98 mb/d.
Product Markets and Refinery Operations
Product markets in the Atlantic Basin continued receiving support from strong US gasoline demand, however higher refinery runs amid increasing gasoline and middle distillate inventories started to exert pressure on the US market, while European margins showed a temporary recovery on the back of falling Brent crude prices. In Asia, strong light distillate demand offset increasing supplies with several refineries back from maintenance, preventing margins from decreasing further.
The dirty tanker market experienced a generally positive trend in July, with dirty tankers in all classes showing gains on both a monthly and an annual basis. VLCC spot freight rates reported a healthy gain of 19%, while both Suezmax and Aframax rates experienced even higher gains of 26% and 28%, respectively. Several factors were behind the increase in dirty tanker rates over the previous month, including delays in eastern and western ports combined with prompt replacements, ullage problems and increased lighterage operations. Clean spot freight rates were weak in July, declining on the back of limited arbitrage and low market activity in both East and West of Suez.
Preliminary data for July shows that US crude oil imports rose to average 7.48 mb/d, up by 241 tb/d from the previous month. However, this represented a drop of 584 tb/d, or 7%, from a year ago. US product imports stayed nearly stable m-o-m at 1.7 mb/d, while y-o-y, they lost 445 tb/d or 20%. Y-t-d, product imports declined by 11%.
Japan's crude oil imports in June reached a low not seen in several years, dropping for a second month in a row by 257 tb/d, or 8%, to average 3 mb/d. Y-o-y, Japan's crude imports declined as well in June by 272 tb/d or 8%. Product imports also dropped in June by 21 tb/d to average 566 tb/d, reflecting a loss of 4% m-o-m, while showing a gain of 11% from the previous year.
China's crude imports dropped in June for the second consecutive month by 479 tb/d, or 8%, to average 5.7 mb/d, after having reached a record high level in April. Y-o-y, China's crude imports were up by 271 tb/d or 5%. China's product imports increased by 47 tb/d from a month ago, however they stood 206 tb/d below the previous year. China's product imports averaged 956 tb/d.
India's crude imports in June increased by 358 tb/d, or 10%, from last month to average 3.9 mb/d. Y-o-y, India's crude imports were 430 tb/d, or 12%, higher. Product imports in June dropped by 10 tb/d from a month ago to average 419 tb/d, while y-o-y they went up by 112 tb/d.
OECD commercial oil stocks fell in June by 7.7 mb to stand at 2,631 mb. At this level, they are 81 mb less than the latest five-year average. Crude inventories indicated a surplus of 1.7 mb, while product stocks remained 83 mb below the last five-year average. In terms of days of forward cover, OECD commercial stocks fell slightly by 0.2 days in June from the previous month to stand at 57.2 days. This was around 1.2 days lower than the latest five-year average.
Preliminary data for July shows that total commercial oil stocks in the US rose for the sixth consecutive month, increasing by 2.1 mb to stand at 1,118.5 mb, the highest level since September 2013. Since February 2014, total US commercial stocks have accumulated a build of 74 mb, putting them 3.0 mb above their fiveyear average at the end of July. Within the components, product stocks saw a build of 21.5 mb, while crude witnessed a stock-draw of 19.3 mb. The latest information for June showed total oil commercial inventories in China falling by 4.9 mb to stand at 402.2 mb, but they were 23.1 mb above last year at the same time. Within the components, commercial crude fell by 5.8 mb, while product stocks rose by 0.9 mb.
Balance of Supply and Demand
Demand for OPEC crude in 2014 was revised down by 0.1 mb/d from the previous report to stand at 29.6 mb/d. In 2015, demand for OPEC crude is expected to remain unchanged to average 29.4 mb/d.
Forecast for 2014
Demand for OPEC crude in 2014 was revised down by 0.1 mb/d from the previous report, reflecting the upward adjustment of non-OPEC supply as well as the downward revision in global demand. The 3Q saw the greatest revisions, with the new demand reflecting a downward adjustment of 0.3 mb/d. All other quarters of 2014 remained unchanged from the previous assessment, with total demand for OPEC crude in 2014 estimated at 29.6 mb/d. The 1Q and 2Q are both estimated to show a decline of 0.9 mb/d and 1.2 mb/d, respectively, versus the same period last year. The 3Q is expected to show a decline of 0.2 mb/d while the 4Q is forecast to increase by 0.1 mb/d, compared with the same quarter last year.
Forecast for 2015
Expected demand for OPEC crude in 2015 remains unchanged from the previous month. Within the quarters, the 2Q15 was revised down by 0.1 mb/d, while all other quarters remained unchanged. Demand for OPEC crude is projected to be 29.4 mb/d.
The 1Q15 is expected to decline by 0.2 mb/d compared with the same period of 2014, while the 2Q is forecast to remain unchanged. The 3Q and the 4Q are projected to see negative growth of 0.3 mb/d and 0.5 mb/d, respectively.
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