The OPEC Reference Basket fell marginally in December to settle at $106.55/b. In yearly terms, the Basket averaged $109.45/b in 2012, a gain of $1.99 over the previous year. In the crude futures markets, the front-month WTI contract rose in December but still registered its first annual loss since 2009, weighed down by rising US shale oil production. Despite slipping marginally in December, ICE Brent saw a further increase in 2012. Outages in the North Sea, geopolitical considerations, and increased trading volumes in the ICE Brent contract have all provided support for the Brent price. Money managed increased net long positions on the Nymex and ICE in December by 64,787 contracts to 289,004 lots, a gain of almost 30%. For the year, speculative activities and trading volumes in the ICE Brent market jumped 70% and 12% respectively, compared to a decline of 10% and 19% for Nymex WTI.
World economic growth is estimated at 3.0% in 2012 and 3.2% in 2013, unchanged from the previous report. Following last month’s revision, US growth expectations for 2013 remain at 2.0%, down from an upwardly-revised 2.3% for last year. In Japan, fiscal and monetary stimulus might lift growth to 0.7%, after an estimated expansion of 2.0% in 2012. The Euro-zone is still forecast to recover to 0.1% after contracting by 0.4% last year. China is benefiting from increasing global trade and is forecast to expand by 8.0% in 2013, following 7.6% growth in 2012. After 5.5% growth last year, India is expected to grow at a higher 6.4% in 2013.
The forecast for world oil demand growth in 2013 remains unchanged at 0.8 mb/d, in line with the growth seen in the previous year. This year, the impact of economic \ turbulence on oil demand should be considerably milder than in previous years. The OECD region is expected to continue to contract this year by 0.2 mb/d, although at only half the rate seen in 2012. The non-OECD region is projected to consume about 1 mb/d more than last year. Transportation and industrial sectors are expected to provide most of the consumption this year and to be the source of most of the growth.
Non-OPEC oil supply growth in 2012 is estimated at 0.5 mb/d, broadly in line with the previous assessment. In 2013, non-OPEC supply is expected to increase by 0.9 mb/d. Growth is seen coming mainly from the US, Canada, South Sudan and Sudan, Brazil, and Australia, while Norway, Mexico, Syria, and the UK are seen declining in 2013. OPEC NGLs are expected to increase by 0.2 mb/d in 2013. In December 2012, total OPEC crude production averaged 30.37 mb/d, according to secondary sources, indicating a decline of 465 tb/d from the previous month.
Product markets in the Atlantic Basin continued to fall in December as sentiment remained bearish on increasing supplies, following the return of refineries from seasonal maintenance. A lack of support from the winter season – as mild weather dampened heating oil demand – hit cracks at the middle of the barrel and caused margins to fall further. In Asia, refinery margins exhibited a slight recovery on the back of rising seasonal demand, supporting middle distillates and fuel oil.
In the tanker market, average VLCC spot freight rates were stable, retaining the gains achieved last month. Suezmax freight rates rose on all reported routes as a result of increased activities. Aframax freight rates were mixed, but declined on average due to limited demand amid ample vessel supply. Clean tanker freight rates increased on the back of a rise in activities, heading into the year-end holidays. OPEC spot fixtures rose 2% to average 14.54 mb/d, while OPEC sailings increased 0.5% to average 24.38 mb/d.
Preliminary data for November shows that total OECD commercial oil stocks experienced a seasonal decline of 15.3 mb. Despite the fall in total stocks, inventories showed a surplus of 16.0 mb compared to the five-year average. However, components differed with crude showing a gain of 51 mb and products a draw of 29 mb. In days of forward cover, OECD commercial stocks stood at nearly 58 days in November, a gain of almost two days over the five year average. US total commercial oil stocks fell in December by 3.0 mb, but still showed a surplus of 35 mb over the five year average. The decline was attributed to crude, which fell by 11.8 mb, while products rose 8.8 mb.
Demand for OPEC crude in 2012 saw only a marginal revision from the previous assessment to stand at 30.1 mb/d, representing a decline of 0.2 mb/d from the previous year. Required OPEC crude in 2013 is forecasted to average 29.6 mb/d, down 0.4 mb/d from the previous year, following a downward adjustment of 0.1 mb/d from the previous report.