- The OPEC Reference Basket remained volatile in June, moving within a wide range of $102-$114/b. In monthly terms, the Basket fell for the second consecutive month to average $109.04/b, down 90¢ from the previous month. Futures prices also declined as macroeconomic sentiment weakened across many regions, as well as on the temporary impact of the IEA’s decision to release oil from strategic reserves. The Nymex WTI front-month fell a further $5 or 5% to average $96.29/b. ICE Brent also declined but at a slower pace, due to lower supplies of light sweet crude and constraints in North Sea production. As a result, the Brent spread over WTI jumped to a record high on a monthly basis of around $17.60/b. In early July, the market remained volatile due to reduced speculative activity and weaker economic data. The Basket stood at $111.35/b on 11 July.
- The forecast for world economic growth in 2011 remains at 3.9% following off setting revisions in the US, Japan and Euro-zone. Growth in the developing countries remains unchanged, with China growing by 9.0% and India by 8.1% this year. In 2012, the world economy is expected to grow by 4.1%, slightly higher than in 2011. The OECD is forecast to grow by 2.5%, compared with this year’s growth of 2.1%. OECD growth is supported by the recovery in the Japanese economy, which is expected to expand by 2.5%. US growth is forecast at a higher 2.9%, while growth in the Euro-zone is seen slowing to 1.5%, due to planned austerity measures. The strong expansion in the developing countries is expected to ease somewhat, with China forecast at 8.5% and India at 7.7%.
- World oil demand is forecast to grow by 1.36 mb/d in 2011, slightly lower than in the previous report, as the unsteady global economy has added risks to the forecast. In 2012, global oil demand is expected to grow at a slightly lower 1.32 mb/d. The global economic recovery has been facing challenges across the OECD, adding to the uncertainties to next year’s forecast. US gasoline demand is expected to be back in its normal growing mode; however it will remain a major factor affecting oil demand projections. The disruption in nuclear power generation in Japan could also increase oil consumption in the coming year.
- Non-OPEC supply is expected to increase by 0.6 mb/d in 2011, representing a marginal downward revision from last month, primarily due to weaker production data in the first half of the year. In 2012, non-OPEC oil supply is expected to grow by 0.7 mb/d. Brazil, Canada, the US, and Colombia are forecast to be the main contributors to the growth, while Norway, the UK, Malaysia, and Mexico are seen experiencing the largest declines. OPEC NGLs and non-conventional oils are seen reaching 5.7 mb/d in 2012, indicating an increase of 0.4 mb/d over this year. In June, according to secondary sources, OPEC production is estimated at 29.60 mb/d, a gain of 520 tb/d over the previous month.
- Product markets continued to be impacted by weaker-than-expected demand growth at the onset of the driving season. The bearish sentiment for light distillates was further fuelled by a sharp drop in naphtha demand from the petrochemical sector globally. The disappointing performance at the top of the barrel was partially offset by improvements at the bottom. Looking ahead, the expected increase in summer demand is likely to be offset by higher refinery runs, limiting any upward pressure on product markets.
- The tanker market was mixed in June as VLCC rates increased, while Suezmax and Aframax spot rates declined. Chinese activity supported the increase in VLCC rates while limited activities as well as excess tonnage availability influenced the Suezmax and Aframax markets. Product spot freight rates fell 18% in June, reflecting reduced activities. OPEC sailing increased by 1% last month.
- US commercial inventories rose a further 4.1 mb in June. The build was attributed to products which rose 19.4 mb, while crude stocks fell 15.2 mb. The surplus with the five-year average stood at 7.1 mb. In Japan, the most recent data for May shows that commercial oil inventories declined slightly by 0.7 mb. Crude and products showed a mixed picture with crude up 1.7 mb and total products inventories down 2.4 mb. Japanese oil stocks stood at 1.9 mb below the five-year average.
- The demand for OPEC crude in 2011 is estimated at 30.0 mb/d, around 0.1 mb/d higher than in the previous report. This indicates a rise of 0.4 mb/d over the previous year. In 2012, the initial forecasts for world oil demand, non-OPEC supply and OPEC NGLs indicate a demand for OPEC crude of 30.3 mb/d, an increase of 0.3 mb/d over the current year. However, these forecasts could be impacted by unforeseen events.
