Crude Oil Price Movements
Crude oil prices were volatile in November, with the OPEC Reference Basket dropping by 10% to $43.22/b. ICE Brent was down by 8.4% at $47.08/b and NYMEX WTI fell 8.4% to $45.76/b, reflecting uncertainties in the market. However, crude futures prices moved sharply higher in the first weeks of December, following OPEC and non-OPEC meetings. In November, the Brent-WTI spread averaged around $1.30/b.
World economic growth forecasts remain unchanged at 2.9% for 2016 and 3.1% for 2017. Due to stronger-than-expected growth in 3Q16 in the US and Japan, OECD growth in 2016 was revised up from 1.6% to 1.7%, the same growth as in 2017. China’s figures remain at 6.7% in 2016 and 6.2% in 2017. Growth in India for 2017 was revised down slightly to 7.1% from 7.2%, following growth of 7.5% in 2016. After two years of recession, both Russia and Brazil are forecast to recover in 2017 with growth of 0.8% and 0.4%, respectively.
World Oil Demand
World oil demand growth in 2016 has been revised up slightly to around 1.24 mb/d, following better-than-expected data from OECD Europe, to average 94.41 mb/d. In 2017, world oil demand growth is forecast at 1.15 mb/d to average 95.56 mb/d. OECD will contribute some 0.15 mb/d to oil demand growth in 2017, while non-OECD will contribute the bulk of growth with 1.00 mb/d.
World Oil Supply
Non-OPEC oil supply growth in 2017 was revised up by 70 tb/d to now stand at 0.30 mb/d, following a contraction of 0.78 mb/d in 2016. Non-OPEC supply is expected to average 56.50 mb/d in 2017. OPEC NGLs are forecast to grow by 0.15 mb/d in 2017 to average 6.43 mb/d. In November, OPEC crude oil production increased by 0.15 mb/d to average 33.87 mb/d, according to secondary sources.
Product Markets and Refining Operations
Product markets showed a mixed performance in the Atlantic Basin in November. Refining margins received support from the bottom of the barrel on the back of a tightening market. However, the sharp fall in gasoline cracks hit margins on the US Gulf Coast, while refinery margins in Europe continued to rise supported by a more balanced gasoil market. In Asia, margins strengthened on firm regional demand.
Tanker market sentiment generally strengthened in November as freight rates in both dirty and clean segments of the market increased. On average, dirty tanker spot freight rates rose by 24% from the previous month on the back of improved tonnage requirement and steady activities, in combination with an occasional tightening in vessels supply. Chartering activities and sailings from several ports were reported higher during the month.
OECD total commercial stocks fell in October to stand at 3,027 mb, some 302 mb above the latest five-year average. Crude and product inventories showed surpluses of 184 mb and 118 mb, respectively. In terms of forward cover, OECD commercial stocks in October stood at 65.3 days, some 6.3 days higher than the seasonal average.
Balance of Supply and Demand
Demand for OPEC crude in 2016 is estimated to stand at 31.9 mb/d, an increase of 1.9 mb/d over 2015. In 2017, demand for OPEC crude is forecast at 32.6 mb/d, a gain of 0.7 mb/d compared to 2016.