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Oil Market Highlights - April 2016

Source: OPEC_RP160401 4/13/2016, Location: Europe

Crude Oil Price Movements
The OPEC Reference Basket increased by more than 20% to reach $34.65/b in March. ICE Brent ended up $6.26 at $39.79/b and Nymex WTI surged by $7.34 to $37.96/b. Speculators have amassed a near-record number of bullish bets on increasing oil prices. The Brent-WTI spread narrowed considerably in March to stand at $1.83/b, prompting renewed US buying interest in West African light sweet grades.

World Economy
World economic growth is forecast at 3.1% in 2016, after estimated growth of 2.9% last year, both unchanged from the previous month. OECD growth in 2016 remains at 1.9%, slightly below the 2.0% seen in 2015. In the emerging economies, China and India continue to expand this year at 6.3% and 7.5%, respectively, unchanged from the previous report. Meanwhile, Brazil is forecast to move further into recession this year, contracting by 2.9%, while the contraction in Russia’s economy is unchanged at 1.1%.

World Oil Demand
World oil demand is expected to grow by 1.54 mb/d in 2015, unchanged from the previous report, to average 92.98 mb/d. For 2016, global oil demand growth is anticipated to be around 1.20 mb/d, representing a minor downward revision of 50 tb/d from previous expectations, mainly reflecting the slower economic momentum in Latin America. Total consumption is projected to reach 94.18 mb/d in 2016.

World Oil Supply
Non-OPEC supply growth in 2015 has been revised up slightly to stand at 1.46 mb/d to average 57.13 mb/d. In 2016, the expected contraction in non-OPEC oil supply will be slightly more than forecast, with output falling by 0.73 mb/d to average 56.39 mb/d. OPEC NGL production is expected to grow by 0.17 mb/d in 2016, up from 0.15 mb/d last year, unchanged from the previous report. In March, OPEC crude production increased by 15 tb/d to average 32.25 mb/d, according to secondary sources.

Product Markets and Refining Operations
Product markets in the US were supported by strong domestic gasoline demand fueled by the switch to summer grade gasoline, which allowed refinery margins to remain healthy. In Europe, the lack of export opportunities in gasoline and fuel oil amid weakness in middle distillates caused margins to continue to fall. Meanwhile, refinery margins in Asia exhibited a slight recovery on the back of stronger regional demand and tightening sentiment due to refinery maintenance in the region.

Tanker Market
Average dirty tanker freight rates in March rose by 5% compared to the previous month, mainly as VLCC freight rates increased in March supported by loading delays and ullage problems in the eastern ports. Clean tanker freight rates improved East of Suez but encountered a decline West of Suez impacted by limited tonnage demand. Global chartering activities were higher in March, while arrivals increased in European and far eastern ports.

Stock Movements
OECD commercial oil stocks fell in February to stand at 3,026 mb. At this level, OECD commercial oil stocks are around 351.8 mb above the latest five-year average, with crude and products indicating a surplus of 240.7 mb and 111.1 mb, respectively. In terms of days of forward cover, OECD commercial stocks stood at 66.4 days, some 7.4 days higher than the latest five-year average.

Balance of Supply and Demand
Demand for OPEC crude in 2015 is estimated at 29.7 mb/d, unchanged from the previous month and 0.1 mb/d lower than the year before. In 2016, demand for OPEC crude is projected at 31.5 mb/d, broadly unchanged from the previous report and 1.8 mb/d higher than last year.

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