2019: WORLD OIL DEMAND UP BY 1.29 MBD

OPEC - Monthly Oil Market Report 12 December 2018

Oil Market Highlights

Crude Oil Price Movements

The OPEC Reference Basket (ORB) ended November down by $14.06, or 17.7%, month-on-month (m-o-m), to average $65.33/b, its lowest level since last March. Year-to-date (y-t-d), the ORB value was $19.14, or 37.1%, higher at $70.75/b compared with the same period in 2017. Crude oil futures also dropped in November amid weaker market fundamentals as the market focused on global oil supply, which rose faster than expected. ICE Brent prices witnessed eight consecutive weekly declines to reach their lowest level since October 2017 on a daily basis. ICE Brent was on average $14.68, or 18.2%, m-o-m lower at $65.95/b, and NYMEX WTI fell $14.06, or 19.9%, m-o-m to average $56.69/b. Y-t-d, ICE Brent is $18.92, or 35.1%, higher at $72.87/b, while NYMEX WTI increased by $16.03, or 31.9%, to $66.27/b. The first-month ICE Brent/NYMEX WTI spread narrowed 62¢ to $9.26/b, from $9.87/b in the previous month. Both the ICE Brent and NYMEX WTI forward curves were in contango in November as global oil supply grew faster than oil demand, leading to higher oil stocks. The Dubai backwardation structure eased sharply in November due to higher crude oil supply. Hedge funds and other money managers continued to reduce their combined speculative net length positions linked to both ICE Brent and NYMEX WTI to reach their lowest levels since more than a year.

World Economy

The global economic growth forecast remains unchanged at 3.7% for 2018 and at 3.5% for 2019. In the OECD, growth in the US is unchanged at 2.9% for 2018 and at 2.6% for 2019. Euro-zone growth remains at 1.9% for 2018 and 1.7% for 2019. GDP growth in Japan was revised down slightly to 1.0% for 2018, but is unchanged at 1.1% for 2019. In the non-OECD countries, both India's and China's growth forecasts remain at 7.5% and 6.5% for 2018, respectively, and at 7.2% and 6.1%, respectively, for 2019. Growth in Brazil remains unchanged at 1.1% for 2018 and at 1.8% for 2019. Russia's GDP growth forecast is also unchanged at 1.6% for 2018 and 1.7% for 2019. While the upside to global growth is limited, the risk remains skewed to the downside amid ongoing trade tensions, monetary tightening and geopolitical challenges.

World Oil Demand

In 2018, world oil demand growth is foreseen rising by 1.50 mb/d, unchanged from last month's report. OECD Americas is expected to lead growth in OECD regions in response to strong gains for light and middle distillates throughout 2018. Other Asia is projected to lead demand growth in non-OECD and globally after strengthened product demand growth in India, Indonesia, Singapore and Thailand. Total oil demand is now pegged at 98.79 mb/d. In 2019, world oil demand is anticipated to rise by 1.29 mb/d, similar to last month's projections. As a result, total world oil demand is anticipated to reach 100.08 mb/d. Oil demand growth is projected to originate from Other Asia, led by India, followed China, then OECD Americas. OECD countries will rise by 0.25 mb/d, while non-OECD countries will drive oil demand growth by adding an estimated 1.04 mb/d in 2019.

World Oil Supply

Non-OPEC oil supply growth in 2018 is estimated at 2.50 mb/d, an upward revision of 0.19 mb/d from the previous month's assessment. The US, Canada, Russia and Kazakhstan are expected to be the main growth drivers, while Mexico and Norway are anticipated to show the largest declines. With this, total non-OPEC supply for 2018 is now estimated at 60.03 mb/d. Non-OPEC oil supply growth in 2019 was revised down by 0.08 mb/d to stand at 2.16 mb/d and is now forecast to reach an average of 62.19 mb/d. This is mainly due to a lower oil supply forecast for Canada given Alberta's announcement of a mandatory production adjustment, as well as downward supply forecast adjustments for the 10 non-OPEC participants in the Declaration of Corporation in the first half of 2019. The US, Brazil, Russia and the UK are the main drivers for next year's growth, while Mexico and Norway are expected to see sizeable declines. OPEC NGLs in 2018 and 2019 are expected to grow by 0.10 mb/d and 0.11 mb/d to average 6.34 mb/d and 6.45 mb/d, respectively. In November, OPEC crude oil production decreased by 11 tb/d to average 32.97 mb/d, according to secondary sources.

Product Markets and Refining Operations

Product markets in the Atlantic Basin during November showed mixed performances. In the US, product markets weakened slightly despite positive performance at the middle of the barrel due to considerable gasoil and jet/kerosene inventory drawdowns. In Europe, product markets showed a strong recovery from the slump witnessed in the previous month, supported by soaring cracks in the middle and bottom of the barrel. Moreover, European product markets also benefitted from an additional boost all across the barrel driven by the decline in feedstock costs as well as bullish sentiment as refineries in France went on strike. In Asia, product markets continued to weaken, exhibiting slight losses in November as steep declines in cracks at the top of the barrel weighed on margins despite strong positive performances in the bottom of the barrel.

Tanker Market

The tanker market experienced a general strengthening trend in November as freight rates in both the dirty and clean segments of the market increased. On average, dirty tanker spot freight rates rose by 21% from the previous month on the back of increased tonnage requirements, tonnage tightening and transit delays. The enhanced market activities were seen to drive rates higher in several areas, affecting all tanker sectors in the market, moreover a reduction in bunker prices reduced operational costs, thereby enhancing earnings.

Stock Movements

Preliminary data for October showed that total OECD commercial oil stocks rose by 7.6 mb m-o-m for the fourth consecutive month to settle at 2,883 mb, which is 41 mb lower than the same time one year ago but 22.5 mb above the latest five-year average. Within the components, crude stocks indicated a surplus of 4.0 mb, while product stocks were 18.5 mb above the latest five-year average. In terms of days of forward cover, OECD commercial stocks rose by 0.5 days m-o-m to stand at 60.0 days in October, which was 1.0 day below the same period in 2017 and 1.2 days lower than the latest five-year average.

Balance of Supply and Demand

Demand for OPEC crude in 2018 is estimated at 32.4 mb/d, which is 1.1 mb/d lower than the 2017 level. In 2019, demand for OPEC crude is forecast at 31.4 mb/d, around 1.0 mb/d lower than the estimated 2018 level.

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Earlier: 

2018, December, 12, 09:15:00 OIL PRICE: NEAR $61 YET REUTERS - International Brent crude oil futures LCOc1 were at $60.86 per barrel at 0543 GMT, up 66 cents, or 1.1 percent, from their last close. U.S. West Texas Intermediate (WTI) crude futures CLc1 were at $52.22 per barrel, up 57 cents, or 1.1 percent.

2018, December, 12, 09:10:00 RUSSIA WILL CUT 50 TBD PLATTS - Russia will cut its liquids output by 50,000-60,000 b/d in January under the latest agreement with OPEC, energy minister Alexander Novak said Tuesday. "The monthly schedule for the output cut has already been [set]... We expect output will be cut by at least 50,000 b/d-60,000 b/d in January," he said, as reported by Prime news agency. Русский | English

2018, December, 12, 09:05:00 АЛЕКСАНДР НОВАК В ИНТЕРВЬЮ CNN: “НАШИ РЕШЕНИЯ ОСНОВАНЫ НА ФУНДАМЕНТАЛЬНЫХ ФАКТОРАХ РЫНКА” МИНЭНЕРГО РОССИИ - Как отметил Александр Новак, принятое решение о снижении суммарной добычи на 1,2 млн барр./сутки отражает ожидания рынка накануне встречи стран ОПЕК и не ОПЕК. As noted by Alexander Novak, the decision to reduce the total production by 1.2 million barrels per day reflects the market expectations on the eve of the meeting of OPEC and non-OPEC countries. Русский | English

2018, December, 5, 09:40:00 OIL, GAS CONSUMPTION UP IEA - Based on the latest available energy data, energy-related CO2 emissions in North America, the European Union and other advanced economies in Asia Pacific grew, as higher oil and gas use more than offset declining coal consumption. As a result, the IEA expects CO2 emissions in these economies to increase by around 0.5% in 2018.

2018, November, 15, 15:47:00 OPEC: OIL DEMAND 2019: 100 MBD OPEC - In 2018, oil demand growth is anticipated to increase by 1.50 mb/d y-o-y, a downward revision from the previous month of 40 tb/d, mainly due to weaker-than-expected oil demand data from the Middle East and, to a lesser extent, China during 3Q18. Expected total oil demand for the year is anticipated to reach 98.79 mb/d. In 2019, world oil demand growth is forecast to grow by 1.29 mb/d y-o-y, about 70 tb/d lower than last month’s projection, with total world consumption to reach 100.08 mb/d.

2018, October, 26, 12:30:00 UPSTREAM NEEDS INVESTMENT OGJ - Spending on worldwide oil and gas developments needs to increase by about 20% to meet future demand growth and ensure companies sustain production over the next decade,

2018, October, 12, 11:30:00 OPEC: OIL DEMAND UP BY 1.54 MBD OPEC - In 2018, world oil demand growth is estimated at 1.54 mb/d, following a downward revision of around 80 tb/d from the previous month’s assessment, mainly to reflect the most up-to-date data in OECD Europe and the Middle East, as well as the latest developments in the economies of in Latin America.