Oil market highlights from OPEC's November Monthly Oil Market Report
- The OPEC Reference Basket declined by US$ 2.04 to US$ 106.69/bbl in October after four consecutive months of gains. All Basket component values moved lower, but by varying degrees. Most components were affected by high crude oil inventories, as refineries entered into autumn seasonal turnaround and refining margins remained low. Crude oil futures prices on both sides of the Atlantic moved lower in October with ICE Brent down US$ 1.81 to US$ 109.44/bbl and Nymex WTI declining by US$ 5.68 to US$ 100.55/bbl, which widened the Brent-WTI spread to US$ 8.90/bbl. Downside pressure came on US futures due to the sharp climb in US crude inventories, even as the Federal Reserve left its economic stimulus intact following the US government shutdown. Easing geopolitical tensions also continued to deflate the risk premium in the market.
- World economic growth forecasts for 2013 and 2014 remain unchanged at a moderate level of 2.9% and 3.5%, respectively. The forecast for the OECD continues to assume a recovery in most major economies, leading to growth of 1.9% in 2014, compared to 1.2% in the current year, unchanged from the previous report. India has been impacted by decelerating investment and capital outflows recently, necessitating a downward revision in its growth figures, which now stand at 4.7% in 2013, compared to 5.0% previously, and 5.6% in 2014 from 5.8%. China’s recent stimulus efforts and rising exports have led to upwardly revised growth of 7.8% this year, from 7.6% previously, and 7.8% next year, from 7.7%. Although the global economy continues to improve, the pace of growth remains sluggish and near-term developments will need close monitoring.
- World oil demand growth in 2013 has been revised up slightly by 34 tb/d from last month’s report. This revision is based on actual and preliminary data for the first half of the year, generally coming from all OECD regions as well as some non-OECD countries, particularly in Africa. World oil demand growth for this year currently stands at 0.9 mb/d. For 2014, the forecast for world oil demand growth remains unchanged at 1.04 mb/d.
- Non-OPEC oil supply in 2013 is estimated to increase by 1.2 mb/d, representing a minor upward revision from the previous report. In 2014, non-OPEC oil supply is forecast to grow by 1.2 mb/d, also slightly higher than last month’s report. The US, Canada, Brazil, South Sudan & Sudan, Kazakhstan and Colombia are expected to be the main contributors to next year’s growth, while Norway, the UK, Syria, and Mexico are anticipated to see the largest declines. OPEC NGLs and nonconventional oils are seen averaging 5.9 mb/d in 2014, indicating growth of 0.1 mb/d over the current year. In October, OPEC crude oil production averaged 29.89 mb/d, almost unchanged over the previous month, according to secondary sources.
- Product markets exhibited a mixed performance in October. The top of the barrel continued its seasonal weakening, despite some positive signs for naphtha, while middle distillates and fuel oil rebounded worldwide on the back of a slight recovery in demand amid temporary tightening in some regions. Together with the fall in crude oil prices, this helped product margins to recover.
- In the tanker market, dirty spot freight rates saw mixed movements in October. VLCC spot freight rates exhibited gains on all reported routes from the previous month. On average, VLCC spot freight rates were 6% higher than a month ago. The increase was mainly driven by winter seasonal demand and increased shipments from Middle East to Asia. In the clean tanker market, both Suezmax and Aframax freight rates dropped as result of limited tonnage demand, with both East and West of Suez rates falling 3% and 11% compared to the previous month.
- Preliminary data for September shows total OECD commercial oil stocks rose by 7.5 mb. Inventories continued to show a deficit with the five-year average, now at 33 mb, divided between crude and products. In term of forward cover, OECD commercial oil stocks stood at around 58 days in September, 0.1 day more than the five year average. Preliminary data shows that total US commercial oil stocks fell by 9 mb in October, reversing the build of last two months, but still showed a surplus of 34 mb with the five-year average. The gain was concentrated in crude, which indicated a surplus of 40 mb, while products showed a deficit of 7 mb.
- Demand for OPEC crude in 2013 is estimated to average 29.9 mb/d, unchanged from the previous report, representing a decline of 0.6 mb/d from last year. The forecast for next year was also unchanged at 29.6 mb/d, representing a decline of 0.3 mb/d compared to the current year.
Read the full report here.
Adapted from press release by David Bizley
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