The OPEC Monthly Oil Market Report (MOMR) for May 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 the oil price gap up from OPEC+ announced a surprise over 1.5 million barrel per day crude oil production cut was filled with the lowest prices since December 2021. We also have a sputtering China is reopening after COVID Zero and US Crude Oil SPR Inventories the lowest since Oct 1983.
Late last year OPEC+ had already decreased crude oil production by 2mbpd. OPEC reiterated uncertainties around global economic growth and the outlook for Russian oil production.
MOMR Highlights
- The world oil demand growth estimate for 2023 to rise by 2.33 million barrels per day in 2023 (near unchanged from 2.32M previously)
- China’s oil demand to rise by 800,000 barrels per day in 2023, up from 760,000 previously forecast
- For 2023, the forecast for non-OPEC liquids production growth also remained 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 in Russia.
- Uncertainties remain, primarily related to the potential of US shale oil output and unplanned field maintenance in 2023.
- OPEC NGLs and non-conventional liquids are forecast to grow by 50 tb/d to average 5.44 mb/d in 2023.
- OPEC-13 crude oil production in April decreased by 191 tb/d m-o-m to average 28.60 mb/d,
- according to available secondary source
- 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 to stand at 29.3 mb/d. This is around 0.8 mb/d higher than in 2022.
- Leaves 2023 world economic growth forecast at 2.6%
- US debt ceiling issue has been so far not been resolved. A matter that could have economic consequences.
OPEC Monthly Oil Market Report May 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 Economy
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. The global economy continues to navigate through challenges 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 remains unchanged at 1.2%, following growth of 2.1% for 2022.
- The Euro-zone’s economic growth forecast for 2023 remains at 0.8%, after growth of 3.5% for 2022.
- Japan’s economic growth forecast for 2022 remains at 1.0% for both 2022 and 2023.
- China’s economic growth forecast remains at 5.2% for 2023, compared with 3% 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 across both years, with an estimated contraction of 2.1% for 2022 and a smaller forecast contraction of 0.5% for 2023
World Oil Demand
The world oil demand estimate for 2022 remains unchanged from last month’s assessment, with a growth of 2.5 mb/d y-o-y. In the OECD, oil demand was adjusted slightly downward in the 4Q22, amid data showing a demand decline in OECD Americas. This was entirely offset by a slight upward revision to the estimation for non-OECD countries.
For 2023, the forecast for world oil demand growth remains broadly unchanged at 2.3 mb/d, with the
OECD projected to grow by almost 0.1 mb/d and the non-OECD expected to grow by about 2.3 mb/d. Within the regions, slight downward adjustments in 1Q23 for the OECD were offset by upward revisions to the non-OECD.
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, the forecast for non-OPEC liquids production growth also remained 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 in Russia. Uncertainties remain, primarily related to the potential of US shale oil output and unplanned field maintenance in 2023. OPEC NGLs and non-conventional liquids are estimated to have grown by 0.1 mb/d in 2022, to average 5.39 mb/d, and are forecast to grow by 50 tb/d to average 5.44 mb/d in 2023. OPEC-13 crude oil production in April decreased by 191 tb/d m-o-m to average 28.60 mb/d, according to available secondary source.
Product Markets and Refining Operations
Refinery margins dropped to their lowest level to date in April, following mild gains in the previous month. Product output in the Atlantic Basin rose as refinery runs recovered and the peak maintenance season approached an end. Moreover, weaker US diesel export opportunities, amid expectations of ample middle distillate arrivals into Europe, weighed on product markets and crack spreads. In Asia, softening product exports contributed to weakness across the barrel except for residual fuel, which benefitted from firm domestic requirements and lower imports. Global refinery processing rates recovered in April, gaining 918 tb/d, according to preliminary estimates.
Tanker Market
Dirty spot freight rates continued to improve in March, with m-o-m gains across most monitored routes. VLCCs saw the sharpest increase, rising by 45% on the Middle East-to-East route, as renewed buying from China strengthened rates. Suezmax spot freight rates remained at high levels, up 20% m-o-m on the US Gulf-to Europe route. Aframax rates rebounded from the previous month’s decline, with spot freight rates on the intra-Med route up 23% m-o-m. In the clean tanker market, West of Suez spot freight rates were at 29%, supported by strong performance in the Mediterranean. East of Suez rates fell 10% on average m-o-m, amid a winding down of winter product demand in the Far East
Crude and Refined Products Trade
Preliminary data shows US crude exports set a fresh record high of 4.8 mb/d in March, while US product exports rebounded to average 6.3 mb/d. China’s crude imports in February partially recovered from the decline at the start of the year to average around 10.7 mb/d. China’s product exports also picked up, averaging a robust 1.7 mb/d. India’s crude imports were at their strongest in over 10 months, averaging just shy of 5.0 mb/d in February. India’s product exports also returned to relatively robust levels, averaging 1.4 mb/d. Japan’s crude imports were broadly unchanged m-o-m at 2.7 mb/d in February. Japan’s product exports, including LPG, hit a five-month high in February. Preliminary estimates for March show crude and refined product imports into OECD Europe declining as a workers’ strike in France disrupted port activities and refinery operations, curtailing trade flows
Commercial Stock Movements
Preliminary March 2023 data shows total OECD commercial oil stocks fell m-o-m by 31.7 mb. At 2,808 mb, they were 195 mb higher than the same time one year ago, but 34 mb lower than the latest five-year average and 105 mb below the 2015–2019 average. Within components, crude and product stocks decreased m-o-m by 4.9 mb and 26.8 mb, respectively. At 1,402 mb, OECD crude stocks were 119 mb higher than the same time a year ago and 2 mb higher than the latest five-year average. However, at this level, they were 60 mb lower than the 2015–2019 average.
OECD product stocks stood at 1,406 mb, representing a surplus of 76 mb from the same time a year ago. Nonetheless, this was 36 mb lower than the latest five-year average and 45 mb below the
2015–2019 average. In terms of days of forward cover, OECD commercial stocks fell m-o-m by 0.6 days in March to stand at 61.7 days. This is 4.1 days above the March 2022 level, but 3.2 days less than the latest five-year average and 0.8 days lower than 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 to stand at 29.3 mb/d. This is around 0.8 mb/d higher than in 2022.
Source: OPEC News Release 11 May 2023
From The Traders Community News Desk