The OPEC Monthly Oil Market Report (MOMR) for June 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 sold off despite the latest OPEC+ surprise 1.0 million barrel per day crude oil production cut. We also have a sputtering China is 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.
- World oil demand to rise by 2.35 mil bpd in 2023 (no change to previous forecast)
- China oil demand to rise to 840k bpd (up from 800k bpd previously)
- For 2023, non-OPEC liquids production growth remains unchanged from last month’s assessment, at 1.4 mb/d, y-o-y.
- The main drivers of liquids supply growth are expected to be the US, Brazil, Norway, Canada, Kazakhstan and Guyana, while declines are expected primarily from Russia. Uncertainties remain related to US shale oil output potential and unplanned maintenance in 2023.
- OPEC-13 crude oil production in May decreased by 464 tb/d m-o-m to average 28.06 mb/d, according to available secondary sources.
- Sees world economic growth at 2.6% this year, but there are rising uncertainties amid high inflation, rising interest rates
OPEC Monthly Oil Market Report June 2023
Crude Oil Price Movements
In April, the OPEC Reference Basket (ORB) increased by $5.68, or 7.2%, m-o-m to average $84.13/b.
The ICE Brent front-month contract rose by $4.16, or 5.3%, m-o-m to $83.37/b, and the NYMEX WTI front month contract increased by $6.07, or 8.3%, m-o-m to average $79.44/b. The DME Oman front-month contract rose by $5.13, or 6.5%, m-o-m to settle at $83.47/b. The front-month ICE Brent/NYMEX WTI spread narrowed by $1.91 m-o-m to average $3.93/b.
The futures forward curves of ICE Brent, NYMEX WTI and DME Oman strengthened across the month. Hedge funds and other money managers raised bullish positions in ICE Brent and NYMEX WTI in April.
World economic growth is estimated at 3.3% for 2022 and forecast at 2.6% for 2023, both unchanged from the previous month’s assessment. While economic activities have been steady so far in the 1H22, the global economy continues to navigate through uncertainties including high inflation, higher interest rates in the US and the Euro-zone, and high debt levels in many regions.
- The US economic growth forecast for 2023 is revised up by 0.1% to stand at 1.3%, following a growth of 2.1% for 2022.
- The Euro-zone’s economic growth forecast for 2023 remains at 0.8%, following a growth of 3.5% for 2022.
- Japan’s economic growth forecast remains at 1.0% for both 2022 and 2023.
- China’s economic growth forecast remains at 5.2% for 2023, following a growth of 3.0% for 2022.
- India’s 2022 economic growth estimate is unchanged at 6.7%, and the forecast for 2023 remains at 5.6%.
- Brazil’s economic growth estimates for 2022 and 2023 are unchanged at 2.9% and 1.0%, respectively.
- Russia’s growth is also unchanged, with an estimated contraction of 2.1% for 2022 and a forecast contraction of 0.5% for 2023
World Oil Demand
The world oil demand growth estimate for 2022 remains unchanged from last month’s assessment, with y-o-y growth of 2.5 mb/d. For 2023, the forecast for world oil demand growth remains broadly unchanged at 2.3 mb/d.
China, Latin America, and the Middle East have been revised up slightly, while OECD Europe, Other Asia and Africa have been adjusted slightly lower. The OECD is expected to grow by about 50 tb/d and the non-OECD by about 2.3 mb/d in 2023
World Oil Supply
Non-OPEC liquids supply is estimated to have grown by 1.9 mb/d in 2022, broadly unchanged from the
previous month’s assessment. The main drivers of liquids supply growth for 2022 were the US, Russia,
Canada, Guyana, China and Brazil, while the largest declines were seen in Norway and Thailand. For 2023,
non-OPEC liquids production growth remains unchanged from last month’s assessment, at 1.4 mb/d, y-o-y.
The main drivers of liquids supply growth are expected to be the US, Brazil, Norway, Canada, Kazakhstan and Guyana, while declines are expected primarily from Russia. Uncertainties remain related to US shale oil output potential and unplanned maintenance in 2023. OPEC NGLs and non-conventional liquids are forecast to grow by 0.1 mb/d in 2022 to average 5.39 mb/d and by 50 tb/d to average 5.44 mb/d in 2023. OPEC-13 crude oil production in May decreased by 464 tb/d m-o-m to average 28.06 mb/d, according to available secondary sources.
Product Markets and Refining Operations
Refinery margins in the US Gulf Coast (USGC) declined for the second-consecutive month in May to their
lowest level this year. This downturn – attributable to rising refinery product output levels – was considerably more limited than that seen in April, with most of the decline driven by transport fuels. In Rotterdam, margins showed solid gains backed by stronger gasoline and fuel oil markets. Lower feedstock prices provided further support and led to mild gains for Asian refining economics. Preliminary estimates indicate that the global refinery intake rose further m-o-m in May, increasing 556 tb/d to average 81.3 mb/d.
Dirty freight rates showed mixed movement in May. VLCCs experienced m-o-m declines on all monitored routes, with Middle East-to-East spot freight rates falling 27% as long-haul tanker demand declined. Suezmax rates recovered some of the previous month’s losses, with rates on the USGC-to-Europe route increasing 35%. Aframax spot freight rates showed a strong performance on the Caribbean-to-US East Coast route, which jumped 121%, while Mediterranean routes saw a mixed performance, with intra-Med rates up 2% and Mediterranean-to- Northwest Europe rates down 9%. Clean freight rates showed declines on all reported routes, with the steepest losses on West of Suez routes.
Crude and Refined Products Trade
Preliminary data shows US crude imports increased m-o-m in May to average 6.4 mb/d. US crude exports
exhibited a still strong performance, averaging 4.3 mb/d, although lower than the record level of 4.8 mb/d achieved in March. China’s crude imports in April fell back from the high levels of the previous month, to average about 10.3 mb/d, although preliminary data shows a recovery in May to average 12.2 mb/d. China’s product imports jumped 26% to reach a record high of 2.2 mb/d, driven by inflows of LPG, naphtha and fuel oil. In April, India’s crude imports slipped further from the 10-month high seen in February to average a still robust 4.8 mb/d.
India’s product exports fell sharply from last month’s high levels to average 1.1 mb/d. Japan’s crude imports recovered in April from seasonal lows, averaging 2.9 mb/d. Japan’s product exports, including LPG, continued to decline, averaging 378 tb/d in April, the lowest since the same month last year. Preliminary estimates for May show OECD Europe crude imports declined seasonally, while tanker tracking data shows product imports remaining close to year-ago levels.
Commercial Stock Movements
Preliminary April 2023 data sees total OECD commercial oil stocks up m-o-m by 30.2 mb. At 2,808 mb, they were 144 mb higher than the same time one year ago, but 74 mb lower than the latest five-year average and 119 mb below the 2015–2019 average. Within the components, crude stocks fell by 0.5 mb, while product stocks rose m-o-m by 30.6 mb. OECD commercial crude stocks stood at 1,384 mb in April. This was 77 mb higher than the same time a year ago, but 42 mb below the latest five-year average and 88 mb lower than the 2015–2019 average.
Total product inventories stood at 1,424 mb, representing a surplus of 66 mb above the same time a year ago, However, this was 32 mb lower than the latest five-year average and 30 mb below the 2015–2019 average. In terms of days of forward cover, OECD commercial stocks fell m-o-m by 0.1 days in April to stand at 60.9 days. This is 2.9 days above the April 2022 level, but 3.3 days lower than the latest five-year average and 1.3 days below the 2015–2019 average.
Balance of Supply and Demand
Demand for OPEC crude in 2022 remains unchanged from last month’s assessment at 28.4 mb/d. This is
around 0.5 mb/d higher than in 2021. Demand for OPEC crude in 2023 also remains unchanged from the
previous assessment at 29.3 mb/d. This is around 0.9 mb/d higher than in 2022.
Source: OPEC News Release 11 June 2023
From The Traders Community News Desk