Crude Oil Price Movements
The OPEC Reference Basket increased by $2.63 to average $45.84/b in June. ICE Brent
ended up $2.28 at $49.93/b and NYMEX WTI gained $2.06 to stand at $48.85/b.
Speculators cut net long positions further this month in all markets. The ICE Brent-WTI
spread widened to $1.07/b in June, up from 85¢/b in the previous month.
World economic growth for this year was revised down to 3.0% from 3.1%, considering
potential economic impacts from the UKs vote to leave the EU. Global growth for 2017 is
forecast at 3.1%. OECD growth has been reduced to 1.8% from 1.9% for 2016 and stands
at 1.7% in 2017. The 2016 forecasts for the major emerging economies remain broadly
unchanged. China and India are seen expanding this year at 6.5% and 7.5%, respectively,
and growth is forecast to slow slightly to 6.1% and 7.2% in 2017. Brazil and Russia are
forecast to rebound from a two-year recession and grow by 0.4% and 0.7% in 2017.
World Oil Demand
World oil demand growth in 2016 is expected to be around 1.2 mb/d, broadly unchanged
from the previous report to average 94.2 mb/d. The initial forecast for world oil demand
growth in 2017 stands at 1.2 mb/d to average 95.3 mb/d. The bulk of growth is projected to
originate in the non-OECD, which is expected to contribute 1.1 mb/d, although OECD
demand will remain in positive territory at 0.1 mb/d.
World Oil Supply
Non-OPEC oil supply in 2016 is forecast to show a stronger contraction of 0.9 mb/d,
following a downward revision of 0.1 mb/d since the last report, to average 56.0 mb/d. This
is mainly due to lower oil output from Canada in 2Q16 due to the wildfire, as well as from
the US. Non-OPEC oil supply in 2017 is projected to decline by 0.1 mb/d to average
55.9 mb/d. Brazil and Canada are the main drivers of growth next year while Mexico, the
US, and Norway are expected to see declines. OPEC NGLs are expected to grow by
0.15 mb/d in 2017. In June, OPEC-14 crude production increased by 264 tb/d to average
32.86 mb/d, according to secondary sources.
Product Markets and Refining Operations
Higher export opportunities amid lower inflows of middle distillates and fuel oil have eased
the oversupply environment in the Atlantic Basin. This has allowed refinery margins to
strengthen slightly, despite gasoline being impacted by regional oversupply. Meanwhile,
refinery margins in Asia fell as the weakness seen at the top of the barrel outweighed
strong regional gasoil and fuel oil demand, which have been boosted by power generation
Dirty tanker spot freight rates declined on average in June. This was mainly on the back of
the continued decline in VLCC rates on all reported routes. Suexmax spot freight rates
were supported by a strengthening market in West Africa on occasional tightness in vessel
availability. Aframax freight rates were flat from the month before, suffering from limited
activity and maintenance work at some ports.
OECD commercial oil stocks fell in May to stand at 3,063 mb. At this level, OECD
commercial oil stocks are around 329 mb above the five-year average, with crude and
products indicating a surplus of 199 mb and 130 mb, respectively. In terms of days of
forward cover, OECD commercial stocks stood at 65.9 days, some 6.7 days higher than
the five-year average.
Balance of Supply and Demand
Demand for OPEC crude in 2016 is expected to average 31.9 mb/d, an increase of
1.9 mb/d over the previous year. In 2017, the demand for OPEC crude is projected at
33.0 mb/d, a gain of 1.1 mb/d over the current year.