OPEC, which revealed this in its Monthly Oil Market Report (MOMR) for September, explained that the adjustment mainly reflected ‘better-than-expected data’ from OECD region for the 2Q17, particularly OECD Americans and Europe, as well as China.
Owing to the foregoing, the cartel has therefore predicted that, in 2018, world oil demand is anticipated to grow by 1.35 mb/d, an increase of 70,000 b/d from the previous report, reflecting higher growth expectations for OECD Europe and China. In another report, Oil Market Report (OMR) for September released by the International Energy Agency (IEA), global oil demand has been estimated to grow by 1.6 mb/d in 2017, following very strong year-on-year growth in the second quarter by 2.3 mb/d (2.4 percent).
According to the report, “OECD demand growth continues to be stronger than expected, particularly in Europe and the US. Hurricanes Harvey and Irma are projected to slow US oil demand growth in 3Q17.” The IEA’s OMR also disclosed that, in August, global oil supply dropped by 720,000 b/d due to “unplanned outages and scheduled maintenance, mainly in non-OPEC countries.” The first decline in four months, it noted, cut supply to 97.7mb/d. “Compared to a year ago, output was up 1.2 mb/d as non-OPEC continued to show substantial growth. Ten non-OPEC countries cooperating with production cuts achieved more than 100 percent compliance for the first time,” the report explained.
Besides, the September OMR reported that OPEC crude output fell in August for the first time in five months, after renewed turmoil in Libya disrupted flows and others pumped less. “Output decreased by 210 kb/d from 2017 high to 32.67 mb/d. The 12 members bound by OPEC’s supply pact raised their compliance rate to 82per cent from 75per cent during July. For the year as a whole, their compliance rate is 86per cent.”
Nevertheless, OPEC in its September MOMR noted that, based on the current global oil supply/demand balance, OPEC crude in 2017 was estimated at 32.7 mb/d, around 0.5 mb/d higher than in 2016. Similarly, it added, OPEC crude was projected at 32.8 mb/d in 2018, about 0.2 mb/d higher than in 2017.
The cartel also reported that “Refinery margins in the Atlantic Basin strengthened in August. In the US, margins rose amid expectations for a product supply shortfall in the wake of Hurricane Harvey, coupled with already firm domestic demand, which supported product crack spreads. In Europe and Asia, product markets were supported by supply outages in the US, which encouraged higher arbitrage volumes, as well as healthy seasonal demand, which helped lift refinery margins.”
However, in its projection, IEA’s OMR noted that “For 3Q17, our refinery throughput forecast is revised down by 0.7 mb/d, due to Hurricane Harvey’s impact. This results in global refined product undersupply for the second consecutive quarter. In 4Q17, throughput will reach another record level, at 80.9 mb/d as refiners respond to higher margins in the tight product markets.”
For the tanker market, the OPEC in its own report stated that “Average spot freight rates in August followed the typical trend seen in the summer months, with a weakening on most reported routes.” According to the report, “Dirty spot freight rates fell, influenced by high vessel availability, as new deliveries were reportedly added to the fleet, putting pressure on an already oversupplied tonnage market. Clean tanker rates declined on average, influenced by lower rates registered on the West of Suez, despite a temporary hike in rates in the US due to Hurricane Harvey.”
Analysing the crude price movements, the OPEC Reference Basket (ORB) rose for the second consecutive month in August to average $49.60/b, representing a gain of $2.67/b or 6per cent. “Year-to-date, the basket was 30.9per cent higher at $49.73/b. Crude futures prices also saw gains with ICE Brent increasing 5.5per cent to $51.87/b and NYMEX WTI up 3.0per cent at $48.06/b. Year-to-date, crude futures prices were more than 20per cent higher. During the week of 29 August money managers cut WTI futures and options net long positions by 105,671 contracts to 147,303 lots, the US Commodity Futures Trading Commission (CFTC) said. Money managers slightly reduced Brent futures and options net length contracts by 1,296 to 416,551 lots during the same week,” OPEC noted in the MOMR.