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The OPEC Monthly Oil Market Report (MOMR) for August released Monday provides OPEC's outlook for crude oil market developments for the coming year with key developments impacting oil market trends in world oil demand and supply.

 OPEC MOMR Header

MOMR Highlights

  • 2019 oil demand growth lowered by 20k bpd to 1.4 mil bpd 2019
  • Non-OPEC oil supply estimate revised up by 30k bpd to 2.13 mil bpd
  • July output rose 41,000 bpd m/m to 32.32 mil bpd .
  • Saudi Arabia pumped 10.288 mil bpd in July, down 200k bpd from June
  • Despite the cut by Saudi Arabia, OPEC as a whole rose crude production in July.
  • The biggest output gains from Kuwait, Nigeria and the UAE.
  • OPEC sees demand for its crude to be 32.9 mil bpd this year, down 600k bpd than that of 2017..

Oil Market Highlights

Crude Oil Price Movements

In July, the OPEC Reference Basket increased marginally by 5¢ m-o-m to settle at $73.27/b. Oil futures saw mixed movement over the month, while US oil inventories continued to drain, particularly in Cushing, Oklahoma. ICE Brent averaged 99¢ m-o-m lower at $74.95/b, while NYMEX WTI rose $3.26 m-o-m to $70.58/b. Year-to-date (y-t-d), ICE Brent is $19.53 higher at $71.72/b compared to the same period a year earlier, while NYMEX WTI climbed $16.70 to $66.20/b. The ICE Brent/NYMEX WTI spread narrowed by $4.25/b to $4.37/b in July.

Speculative net long positions ended the month lower, particularly for ICE Brent. The Dubai market backwardated structure eased again, while Brent flipped into contango for the remainder of the year. In the US, WTI backwardation increased significantly for the second successive month. Apart from the USGC costal grades, the global sour discount to sweet crudes increased due to a surplus of sour crudes.

World Economy

  • The global GDP growth forecast remains at 3.8% for 2018 and 3.6% for 2019, unchanged from the previous assessment.
  • After a strong 2Q18, US growth was revised up by 0.1 pp in both 2018 and 2019, reaching 2.9% and 2.5%, respectively.
  • Euro-zone growth slowed and the forecasts were revised down by 0.2 pp to 2% for 2018 and by 0.1 pp to 1.9% in 2019.
  • Growth in Japan remains at 1.2% in 2018, and the same level is projected for 2019.
  • India’s forecasts are unchanged at 7.3% for 2018 and 7.4% for 2019.
  • After solid growth in 1H18, China’s growth forecast was revised up by 0.1 pp to now stand at 6.6% for 2018 and remains at 6.2% for 2019.
  • Growth in Brazil was revised down by 0.1 pp, reaching 1.6% in 2018, but a mild rebound to 2.1% is anticipated in 2019.
  • Russia’s GDP growth forecast remains unchanged at 1.8% in both 2018 and 2019.

OPEC IMpact of Tariffs

World Oil Demand

In 2018, oil demand growth is anticipated to increase by 1.64 mb/d, 20 tb/d lower than last month’s projections, mainly due to weaker-than-expected oil demand data from Latin America and the Middle East in 2Q18. Total oil demand is anticipated to reach 98.83 mb/d.

For 2019, world oil demand is forecast to grow by 1.43 mb/d, also some 20 tb/d lower than last month’s assessment. Total world consumption is anticipated to reach 100.26 mb/d. The OECD region will contribute positively to oil demand growth, rising by 0.27 mb/d y-oy, yet with growth of 1.16 mb/d, non-OECD nations will account for the majority of growth expected.

Product Markets and Refining Operations

In July, US margins recorded solid losses as crack spreads for all products with the exception of fuel oil declined, due to weaker fundamentals and higher feedstock costs. Strong middle distillate stock builds and an all-time record breaking jet fuel output further pressured USGC refining margins.

In Europe, product markets recorded moderate gains on the top and bottom of the barrel, supported by firm exports outweighing losses seen in the middle of the barrel. Meanwhile, product markets in Asia strengthened, supported by robust gasoline demand from India, lower fuel oil arrivals from Europe and lower crude prices, which led to reduced feedstock costs for refiners, while gasoil output in China hit new highs.

 Tanker Market

Dirty tanker spot freight rates declined on average in July. This was mainly on the back of the continued weak trend persisting in the market across all classes. VLCC spot freight rates declined on all reported routes, while Suexmax spot freight rates remained flat, suffering from limited activity in general.

Aframax saw mixed freight rates; however, average rates went down, pressured by the drop seen in the Caribbean and despite a firmer market in the Mediterranean. Clean tanker average spot freight rates declined as a result of lower freights West of Suez. Generally, the market remained uneventful, with limited demand on tonnage.

Stock Movements

Preliminary data for June showed that total OECD commercial oil stocks fell by 12.8 mb m-o-m to stand at 2,822 mb. This was 197 mb lower than seen during the same time one year ago, and 33 mb below the latest five-year average. However, OECD commercial oil stocks remain 251 mb above the January 2014 level. In terms of days of forward cover, OECD commercial stocks fell in June to stand at 58.8 days, which is 2.1 days lower than the latest five-year averag

Balance of Supply and Demand

In 2018, demand for OPEC crude is expected at 32.9 mb/d, 0.6 mb/d lower than the 2017 level. In 2019, demand for OPEC crude is forecast at 32 mb/d, around 0.8 mb/d lower than the 2018 level.

Complete Report 

OPEC News Release 13 August 2018 

From The Traders Community News Desk

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