WORLD OIL DEMAND GROWTH: 1.05 MB/D
Oil market highlights
Crude Oil Price Movements
The OPEC Reference Basket fell by $4.86 in August to stand at $100.75/b. Nymex WTI declined by $6.32 to $96.08/b and ICE Brent dropped $4.79 to $103.40/b. Speculators sharply cut net long positions amid ample supply and low demand. The Brent-WTI spread widened to around $7.30/b as stock draws at Cushing, Oklahoma, have finally stalled.
World economic growth for 2014 and 2015 remains unchanged at 3.1% and 3.4% respectively. A better-than-expected US GDP in 2Q14 was offset by on-going challenges in the Euro-zone and a large decline in 2Q14 GDP growth in Japan. This kept the OECD GDP growth forecast at 1.8% in 2014 and 2.0% in 2015. Expectations for China and India remain unchanged, with China growing at 7.4% and 7.2%, and India at 5.5% and 5.8%. Brazil has been revised down to 0.7% in 2014 and 1.4% in 2015, and Russia's GDP growth forecast has also been lowered to 0.3% in 2014 and 1.1% in 2015.
World Oil Demand
World oil demand growth in 2014 is expected to reach 1.05 mb/d, following a downward revision of around 50 tb/d, mainly due to the weaker-than-expected performance of the OECD region. In 2015, world oil demand is forecast to increase by 1.19 mb/d, representing a marginal downward adjustment, as an upward revision in the non-OECD region was offset by slower OECD growth.
World Oil Supply
Non-OPEC oil supply growth is expected to increase by 1.68 mb/d in 2014, following an upward revision of 180 tb/d from last month. In 2015, non-OPEC oil supply is projected to grow by 1.24 mb/d, representing a downward adjustment of 30 tb/d from the previous forecast. OPEC NGLs and non-conventional liquids are forecast to grow by 0.2 mb/d in 2015 to average 6.03 mb/d. In August, OPEC crude oil production according to secondary sources increased by 231 tb/d to average 30.35 mb/d.
Product Markets and Refining Operations
Product markets in the Atlantic Basin saw support from strong US gasoline demand amid a tightening sentiment due to falling inventories. Steady middle distillate demand and lower inflows into the region prevented European margins from dropping while US margins were boosted by falling WTI prices. In Asia, the weaker light distillates market caused refinery margins to continue weakening.
A general weak sentiment was seen in the dirty tanker market in August on the back of low tonnage demand and reduced activities. Clean tanker freight rates improved East of Suez but encountered a slight decline in the West. OPEC and Middle East sailings declined compared to the previous month, although arrivals in all regions were higher, except in the Far East.
OECD commercial oil inventories rose in July, but remained 37 mb below the five-year average. Crude showed a surplus of around 22 mb, while products registered a deficit of 59 mb. In terms of forward cover, OECD commercial stocks stood at 58.2 days in July. Preliminary data for August shows that US total commercial oil stocks rose by around 3.7 mb, which is around 10.0 mb above the five-year average. Crude and product stocks showed surpluses of 7.0 mb and 3.0 mb, respectively.
Balance of Supply and Demand
Demand for OPEC crude in 2014 was revised down by 0.2 mb/d from the previous month to stand at 29.5 mb/d. In 2015, required OPEC crude was also revised down by 0.2 mb/d to stand at 29.2 mb/d.
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MEOG - Judaimi highlighted that the closer cooperation between Saudi Aramco and Indian energy entities is reflected in the partnership with RRPCL and ADNOC on the Ratnagiri mega-refinery and petrochemicals complex in Maharashta this year. He noted that nearly $2 billion in material-service sourcing with Indian companies to date; and the opening of the Aramco Asia India office in 2017.
REUTERS - The United States must not determine European energy policy or decide whether Germany buys Russian gas, a top German diplomat said on Tuesday.
FT - “Total has great ambition in this country, we want to be the largest foreign oil and gas player here,” the company’s chief executive Patrick Pouyanné said on Monday at the launch of a factory outside Moscow.
PLATTS - Petrobras is to form two joint venture companies with China National Petroleum Corp. (CNPC) to complete construction of a refinery and revitalize four mature fields in the offshore Campos Basin, the state-owned Brazilian company said