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The OPEC Monthly Oil Market Report (MOMR) for June released Thursday 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

  • In 2019, world oil demand anticipated to rise by 1.14 mb/d, lower than last month’s assessment by 0.07 mb/d.
  • The downward revision was mainly to account for sluggish oil demand data in the OECD region during 1Q19.
  • The majority of oil demand growth is projected to originate from Other Asia, led by India, followed by China and OECD Americas.
  • Non-OPEC oil supply in 2019 is expected to grow at a pace of 2.14 mb/d, y-o-y, following a robust increase of 2.91 mb/d in 2018. The 2019 non-OPEC supply assessment is unchanged from last month, despite some downward revisions for the US, due to lower-than-expected output in 1Q19, and for Norway and Brazil due to lower-than-expected production in 3Q19 and 4Q19.
  • These revisions are offset by upward revisions to China, and the UK.
  • The US is projected to remain the main driver for non-OPEC supply growth in 2019 adding 1.83 mb/d y-o-y, followed by Brazil, Russia, China, Australia and the UK.
  • In May 2019, OPEC crude oil production is estimated to have decreased by 236 tb/d, m-o-m to average 29.88 mb/d, according to secondary sources.
  • Demand for OPEC crude in 2018 is estimated at 31.6 mb/d, 1.6 mb/d lower than the 2017 level. In 2019, demand for OPEC crude is forecast at 30.5 mb/d, around 1.1 mb/d lower than the estimated 2018 level.

 

Oil Market Highlights

OPEC Monthly Oil Market Report June 2019

Crude Oil Price Movements

The OPEC Reference Basket (ORB) eased in May, dropping m-o-m by 81¢, or 1.1%, to average $69.97/b. Crude oil futures prices ended May sharply lower, reaching their lowest levels since February, registering high volatility, particularly late in the month, fuelled by uncertainty about world economic and global oil demand outlooks amid intensifying trade tensions between the US and China. Oil prices dropped further after the US announced plans to impose tariffs on imports from Mexico. In May, ICE Brent averaged $1.33, or 1.9%, lower m-o-m at $70.30/b, while NYMEX WTI dropped m-o-m by $3.01, or 4.7%, to average $60.87/b. Year-to-date (y-t-d), ICE Brent was $3.47, or 4.9%, lower at $66.75/b, while NYMEX WTI dropped by $7.11, or 10.9%, to $57.97/b, compared to the same month last year. The Brent and Dubai market structure moved deeper into backwardation in May, while the NYMEX WTI price structure remained in contango. Hedge funds and other money managers decreased their bullish positions in both ICE Brent and NYMEX WTI.

World Economy

Following growth of 3.6% in 2018, the global economic growth forecast remains at 3.2% in 2019, unchanged from the previous month’s assessment. The most recent escalation in trade disputes, among numerous other challenges to world economic development, may lead to lower growth in the near term. In the OECD economies, US growth remains at 2.6% for 2019, compared to 2.9% for 2018. GDP growth in Japan is revised slightly up by 0.1 pp to 0.5% for 2019, following growth of 0.8% in 2018. Euro-zone growth for 2019 remains unchanged at 1.2%, albeit down from 1.8% for 2018. In the non-OECD economies, China’s 2019 growth forecast is unchanged to stand at 6.2%, after reaching 6.6% in 2018. India’s 2019 growth forecast is revised downward by 0.3 pp to 6.8%, following 7.3% in 2018. Growth in Brazil for 2019 is revised lower to 1.4% from 1.7%, after seeing 1.1% in 2018, while Russia’s 2019 GDP growth forecast is revised down to 1.4% from 1.6%, following growth of 2.3% for 2018;

OPEC MOMR June Prospects

World Oil Demand

In 2019, world oil demand is anticipated to rise by 1.14 mb/d, lower than last month’s assessment by 0.07 mb/d. The downward revision was mainly to account for sluggish oil demand data in the OECD region during 1Q19. The majority of oil demand growth is projected to originate from Other Asia, led by India, followed by China and OECD Americas. OECD countries are projected to rise by 0.14 mb/d, while non-OECD countries will drive oil demand growth by adding an estimated 1.00 mb/d in 2019. In 2018, world oil demand grew by 1.41 mb/d, unchanged from last month’s assessment. OECD Americas led oil demand growth in the OECD region, on the back of strong gains for light and middle distillates throughout 2018. Other Asia led demand growth in the non-OECD region and globally, after strong product demand growth in India, Indonesia, Singapore and Thailand.

World Oil Supply

OPEC MOMR June Supply

Non-OPEC oil supply in 2019 is expected to grow at a pace of 2.14 mb/d, y-o-y, following a robust increase of 2.91 mb/d in 2018. The 2019 non-OPEC supply assessment is unchanged from last month, despite some downward revisions for the US, due to lower-than-expected output in 1Q19, and for Norway and Brazil due to lower-than-expected production in 3Q19 and 4Q19. These revisions are offset by upward revisions to China, and the UK. The US is projected to remain the main driver for non-OPEC supply growth in 2019 adding 1.83 mb/d y-o-y, followed by Brazil, Russia, China, Australia and the UK. At the same time Mexico, Norway, Kazakhstan, Indonesia and Vietnam are projected to see the largest declines. OPEC NGLs and non-conventional liquids y-o-y are expected to grow by 0.08 mb/d to average 4.84 mb/d in 2019, following growth of 0.13 mb/d in 2018. In May 2019, OPEC crude oil production is estimated to have decreased by 236 tb/d, m-o-m to average 29.88 mb/d, according to secondary sources.

Product Markets and Refining Operations

In May, global product markets saw a mixed performance, affected by a downward correction from the spike in gasoline cracks that had been sustained during previous months. In the US, product markets were supported by the middle of the barrel, as firm jet/kerosene demand, amid supply side pressure caused by excessive rain in the central US regions, affected middle distillate markets. This came despite a downturn in the gasoline complex. In Europe, product markets gained some ground, supported by middle distillate inventory drawdowns, which kept prices sustained, despite a weakening at the top and bottom of the barrels. In Asia, product markets suffered considerable losses, pressured by bearish sentiment triggered by the release of the second batch of export quotas in China. In addition, weaker inter-regional product exports, despite considerable offline capacity on heavy refinery turnarounds within the region, contributed to the downturn.

Tanker Movements

Average dirty tanker spot freight rates rose marginally in May following five months of steady declines, but remained lower y-o-y. Tonnage lists remained in excess due to limited scrapping and steady deliveries. Ship owners have been looking to 2H19 when increased refinery throughput in order to produce sufficient lowsulphur fuel ahead of implementation of IMO 2020 regulations are expected to boost demand for shipping across both the dirty and clean tanker markets. Meanwhile, the clean segment of the tanker market saw m-o-m declines across all routes except Middle East-to-East, which picked up from the weak performance seen the month before.

Stock Movements

Preliminary data for April showed that total OECD commercial oil stocks rose by 25.0 mb m-o-m to stand at 2,874 mb. This was 54.4 mb higher y-o-y and 7.6 mb above the latest five-year average. Within the components, crude stocks indicated a slight deficit of 0.2 mb, while product stocks showed a surplus of 7.9 mb above the latest five-year average. In terms of days of forward cover, OECD commercial stocks m-o-m remained unchanged in April at 60.1 days, which was 1.1 days above the same period in 2018, but 1.4 days below the latest five-year average. ;

Balance of Supply and Demand

Demand for OPEC crude in 2018 is estimated at 31.6 mb/d, 1.6 mb/d lower than the 2017 level. In 2019, demand for OPEC crude is forecast at 30.5 mb/d, around 1.1 mb/d lower than the estimated 2018 level.

OPEC News Release 13 June 2019

From The Traders Community News Desk

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