The OPEC Monthly Oil Market Report (MOMR) for August 2023 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. The report comes after oil has recovered back over $84 for WTI and $87 for Brent with the latest OPEC+ crude oil production cuts and recovering financial markets. We also have a sputtering China reopening after COVID Zero and US Crude Oil SPR Inventories the lowest since Oct 1983. OPEC reiterated uncertainties around global economic growth and the outlook for Russian oil production.
MOMR Highlights
- World oil demand in 2023 expected to grow by 2.4 mb/d, unchanged
- Upward revisions to Q23 for OECD America and OECD Europe were completely offset by downward revisions to 2Q23, mainly in Europe and Other Asia.
- In OECD region, oil demand in 2023 anticipated to rise by 74 tb/d, to an average of 46.0 mb/d, while in the non-OECD region, total oil demand is anticipated to rise by nearly 2.4 mb/d, to average 56.0 mb/d.
- For 2024, world oil demand is forecast to grow by a healthy 2.2 mb/d, unchanged from the previous assessment.
- 2023 growth seen at 2.44m bpd
- 2024 growth seen at 2.25m bpd
- OPEC output fell 836k bpd to 27.31m bpd in July after Saudi voluntary cut
- Non-OPEC liquids supply expected to expand by 1.5 mb/d in 2023, slight upward revision
- The main drivers of liquids supply growth for 2023 expected to be US, Brazil, Norway, Kazakhstan Guyana and China, largest decline is expected from Russia.
- There remain uncertainties associated with US shale oil output potential and unplanned maintenance in 2023.
- For 2024, non-OPEC liquids production is projected to grow by 1.4 mb/d, unchanged.
- For 2024, the main drivers for liquids supply growth are expected to be the US, Canada, Guyana, Brazil, Norway and Kazakhstan, mainly due to existing project ramp-ups. The largest declines are expected from Mexico and Azerbaijan.
- OPEC NGLs and non-conventional liquids are forecast to grow by 46 tb/d in 2023 to an average of 5.4 mb/d and by another 65 tb/d to an average of 5.5 mb/d in 2024.
- In July, OPEC-13 crude oil production decreased by 836 tb/d m-o-m to an average of 27.31 mb/d, according to available secondary sources
OPEC Monthly Oil Market Report August 2023
US rig count, spudded, completed, DUC wells and fracking activity.
Total active US drilling rigs in the week ending 28 July 2023 fell by 5 to 664, according to Baker Hughes. This was down by 103 rigs compared with a year ago. The number of active offshore rigs rose by one w-o-w to 19. This was higher by two compared with the same month a year earlier. Onshore oil and gas rigs were lower w-o-w by 7 to stand at 640 rigs, with five rigs in inland waters. This is down by 106 rigs y-o-y.
Crude Oil Price Movements
The OPEC Reference Basket (ORB) rose by $5.87, or 7.8%, m-o-m to an average of $81.06/b in July. The ICE Brent front-month contract increased by $5.18, or 6.9%, m-o-m to $80.16/b, and NYMEX WTI front-month contract rose by $5.76, or 8.2%, m-o-m to average $76.03/b. The DME Oman front-month contract rose by $6.25, or 8.3%, m-o-m to settle at $81.16/b. The front-month ICE Brent/NYMEX WTI spread narrowed in July m-o-m by 58¢ to average $4.13/b. The futures forward curves of ICE Brent, NYMEX WTI and DME Oman steepened in backwardation during the month on improving oil market fundamental outlooks, and money managers including hedge funds raised bullish positions in ICE Brent and NYMEX WTI
World Economy
World economic growth is revised up slightly for both 2023 and 2024 to stand at 2.7% and 2.6%, respectively.
- US GDP growth for 2023 is revised up to stand at 1.8%, followed by 0.7% growth in 2024.
- Euro-zone economic growth for 2023 is revised down to stand at 0.6%, while growth in 2024 remains at 0.8%.
- Japan’s GDP growth in 2023 remains at 1.1%, followed by growth of 1% in 2024.
- China’s GDP growth remains at 5.2% in 2023 and 4.8% in 2024.
- India’s GDP growth remains at 5.6% for 2023 and 5.9% for 2024. Brazil’s GDP growth is revised up to 1.7% and is expected to increase by 1.2% in 2024.
- For Russia, both the 2023 and 2024 GDP growth forecasts are revised up to stand at 0.6% and 1.0%, respectively.
World Oil Demand
World oil demand in 2023 is expected to grow by 2.4 mb/d, unchanged from the last month’s assessment. Upward revisions to the 1Q23 based on actual data received for OECD America and OECD Europe were completely offset by downward revisions to 2Q23, mainly in Europe and Other Asia. In the OECD region, oil demand in 2023 is anticipated to rise by 74 tb/d, to an average of 46.0 mb/d, while in the non-OECD region, total oil demand is anticipated to rise by nearly 2.4 mb/d, to average 56.0 mb/d. For 2024, world oil demand is forecast to grow by a healthy 2.2 mb/d, unchanged from the previous assessment.
The OECD is anticipated to expand by about 0.3 mb/d, with OECD Americas contributing the largest increase. The non-OECD is set to drive growth, increasing by around 2.0 mb/d, with China, the Middle East and Other Asia contributing the largest share, with further support from India, Latin America, and Africa.
World Oil Supply
Non-OPEC liquids supply is expected to expand by 1.5 mb/d in 2023, a slight upward revision from the previous assessment. The main drivers of liquids supply growth for 2023 are expected to be the US, Brazil, Norway, Kazakhstan Guyana and China, while the largest decline is expected from Russia. There remain uncertainties associated with US shale oil output potential and unplanned maintenance in 2023. For 2024, non-OPEC liquids production is projected to grow by 1.4 mb/d, unchanged from the previous assessment.
For 2024, the main drivers for liquids supply growth are expected to be the US, Canada, Guyana, Brazil, Norway and Kazakhstan, mainly due to existing project ramp-ups. The largest declines are expected from Mexico and Azerbaijan. OPEC NGLs and non-conventional liquids are forecast to grow by 46 tb/d in 2023 to an average of 5.4 mb/d and by another 65 tb/d to an average of 5.5 mb/d in 2024. In July, OPEC-13 crude oil production decreased by 836 tb/d m-o-m to an average of 27.31 mb/d, according to available secondary sources.
Product Markets and Refining Operations
Refinery margins in July continued to rise, with solid gains across all regions. In the US Gulf Coast, margins increased for the second consecutive month, mainly driven by the robust performance of transport fuels, particularly gasoline. In Rotterdam, product markets were boosted by firm product exports to the US and high middle distillate requirements in the region. In Singapore, margin gains were driven by sizeable stock draws and healthy regional product demand, with notable strength registered at the middle and bottom sections of the barrel. Global refinery intake in July continued to trend upwards, moving 793 tb/d higher m-o-m to average 81.9 mb/d, according to preliminary estimates. In the coming months, refinery intakes are expected to be supported by seasonal fuel consumption levels during the summer season.
Tanker Market
The tanker market drifted lower in July, with Aframax and Suezmax spot freight rates approaching the lowest levels seen so far this year amid slowing of activities in the Atlantic basin for these vessels.
- Aframax spot freight rates on the Mediterranean-to-Northwest Europe route declined 22%, while Suezmax rates on the US Gulf Coast-to-Europe route fell 11%.
- VLCC rates experienced less of a decline as a pick-up in long-haul demand out of the Atlantic basin offset reduced activities out of the Middle East.
- Spot freight rates on the Middle East-to-East route declined 15% m-o-m. However, freight rates overall remain at elevated levels amid trade shifts supporting tonne-mile growth.
- Clean rates were mixed, with activities in the Atlantic basin supporting the West of Suez routes, while the return of Asian refineries from maintenance weighed on East of Suez flows. Clean freight rates on the intra-Med route rose 23% m-o-m, while rates on the Middle East-to-East route declined 15%
Product Markets and Refining Operations
Refinery margins in July continued to rise, with solid gains across all regions. In the US Gulf Coast, margins increased for the second consecutive month, mainly driven by the robust performance of transport fuels, particularly gasoline. In Rotterdam, product markets were boosted by firm product exports to the US and high middle distillate requirements in the region. In Singapore, margin gains were driven by sizeable stock draws and healthy regional product demand, with notable strength registered at the middle and bottom sections of the barrel. Global refinery intake in July continued to trend upwards, moving 793 tb/d higher m-o-m to average 81.9 mb/d, according to preliminary estimates. In the coming months, refinery intakes are expected to be supported by seasonal fuel consumption levels during the summer season.
Commercial Stock Movements
Preliminary data for June 2023 sees total OECD commercial oil stocks up m-o-m by 4.2 mb. At 2,828 mb, they were 74 mb lower than the latest five-year average and 119 mb below the 2015–2019 average. Within the components, crude stocks fell by 5.1 mb, m-o-m, while product stocks rose by 9.3 mb. OECD commercial crude stocks stood at 1,395 mb in June. This is 18 mb below the latest five-year average and 70 mb lower than the 2015–2019 average. Total product inventories rose by 9.3 mb in June to stand at 1,433 mb. This is 55 mb lower than the latest five-year average and 49 mb below the 2015–2019 average. In terms of days of forward cover, OECD commercial stocks fell m-o-m by 0.1 days to stand at 60.4 days in June. This is 2.7 days lower than the latest five-year average and 1.4 days below the 2015–2019 average
Balance of Supply and Demand
Demand for OPEC crude in 2023 is revised down by 0.1 mb/d from the previous month’s assessment to stand at 29.3 mb/d. This is around 0.9 mb/d higher than in 2022. Demand for OPEC crude in 2024 is also revised down by 0.1 mb/d from the previous month’s assessment to stand at 30.1 mb/d. This is around 0.8 mb/d higher than in 2023
Source: OPEC News Release 10 August 2023
From The Traders Community News Desk