The OPEC Reference Basket surged $4.37/b or 10.5% in March to average $45.78/b. The market was dominated by developments in equities and other economic indicators. Prices continued to strengthen in early April as economic sentiment showed some improvement following efforts by the G-20 to boost global growth. However, more recently, bearish reports showing a further slowdown in demand and higher stock levels have had a negative impact on prices. The Basket stood at $51.07/b on 14 April.
Despite some positive signals in the US and new aid packages in Japan and Germany, the world economy continued to contract. As a result, the global economic growth forecast for 2009 has been reduced by a further 0.6 percentage points to stand at minus 0.8%. The downward revisions have been made to all world regions except China and India, but primarily in the major OECD economies. The OECD is now expected to decline by 3.1% in 2009, following a downward revision of 0.6 percentage points.
World oil demand in 2008 was revised down slightly to show a decline of 0.3 mb/d, as the world economic crisis caused more damage to global oil demand in the fourth quarter of 2008 than previously expected. In 2009, world oil demand is forecast to fall for the second consecutive year, dropping 1.4 mb/d following a downward revision of 0.4 mb/d. The world economic recession continues to erode oil demand growth, particularly in the US, Japan and China. OECD oil demand is forecast to decline over the entire year while non-OECD is likely to see only minor growth of 0.13 mb/d. On a quarterly basis, Chinaís apparent oil demand in the first quarter moved into the red for the first time since 2005.
Non-OPEC supply in 2008 is now expected to have declined by 0.2 mb/d, following a slight revision from the last assessment. In 2009, non-OPEC supply is expected to increase by 0.3 mb/d, following a downward revision of 80 tb/d. The adjustment is primarily due to lower expectations for China, Mexico, Kazakhstan, Azerbaijan and Vietnam. In March, total OPEC crude production averaged 27.9 mb/d, a decrease of 145 tb/d from the previous month.
Gasoline stock build in the US and a weakening distillate market have exerted pressure on product market sentiment, undermining refining economics in the US and Asia. Due to the continued slowdown in demand and comfortable product stocks as well as increasing spare refining capacity across the globe, the current bearish momentum of product markets is not expected to change in the coming driving season will not be enough to support for crude oil prices.
OPEC spot fixtures declined by 16% in March compared to the previous month. Sailings from OPEC were also lower, but arrivals in the US rose 9%. The continued global economic crisis and greater OPEC compliance on production adjustments were, once again, the main drivers behind lower freight rates for the VLCC sector in the dirty tanker market in March.
US commercial oil stocks witnessed a contra-seasonal build of 16 mb in March to stand at 1,054 mb, implying a huge overhang of 86 mb compared to the five-year-average. Crude oil stocks moved above 360 mb, the highest level since early 1993. Total oil stocks in the EU-15 plus Norway increased for the fourth time in a row to stand at a 22-month high of 1,144 mb in March. Japanís commercial oil stocks recovered sharply in February to stand at the upper end of the five-year range.
The latest developments in the market balance suggest that demand for OPEC crude in 2008 is estimated to have averaged 30.8 mb/d, representing a decline of 0.3 mb/d from the previous year. In 2009, demand for OPEC crude is expected to average 28.7 mb/d, representing a drop of 2.1 mb/d from the previous year.