- The OPEC Reference Basket surged almost 14% to average $56.98/b in May for a gain of $6.78/b, the highest monthly average in seven months. The market was driven by improving economic sentiment lending hope for a recovery in petroleum demand. Refinery problems in the US emerged with the start of the driving season while implied weekly demand reached a two-year high. The fall of the US dollar to a five-month low and the continued rally in equities also impacted the market. The Basket continued to move higher in June as investment institutions forecast higher prices inspiring inflows into energy futures as the dollar weakened. The Basket reached $70.87/b on 10 June.
- Growth for the world economy in 2009 has been revised up slightly by 0.1% to show a decline of 1.3%. This minor change was due to upward revisions mainly in China and India. Developments in these economies have been improving lately, justifying an upward revision for the full year. China’s growth forecast for 2009 was increased from 6.5% to 7.0% while India was revised up from 5.0% to 5.7%. The forecast for the OECD countries remains unchanged at minus 3.8% with US GDP expected to decline by 2.8%, the Euro-zone by 4.2%, and Japan remaining very weak with an expected contraction of 6.4%. While developing Asia has seen some positive momentum, it remains to be seen whether the measures taken by OECD countries are able to produce a sustainable recovery.
- World oil demand is estimated to have fallen by 0.4 mb/d in 2008 following a downward revision of 0.1 mb/d from the previous assessment. The bulk of the revision occurred in the fourth quarter. In 2009, world oil demand is expected to see continued negative growth of 1.6 mb/d, broadly unchanged from the previous report. On a quarterly basis, the first half of the year has seen a downward revision, while a gradual recovery in demand is expected by the end of the year. OECD is projected to fall by 1.8 mb/d, while non-OECD should see slight growth of around 0.2 mb/d.
- The estimate for non-OPEC oil supply in 2008 remains unchanged from the previous assessment, showing a decline of 0.2 mb/d. In 2009, non-OPEC oil supply is projected to increase by 0.2 mb/d from the previous year, broadly unchanged from the previous assessment. OPEC NGLs and nonconventional oils are expected to average 4.7 mb/d in 2009, an increase of 0.4 mb/d over the previous year. In May, OPEC crude oil production averaged 28.27 mb/d, an increase of 135 tb/d over the previous month.
- A combination of the gasoline stock draws in the US, lower refinery runs and product outputs have provided support for product markets, lifting refining margins especially in the Atlantic Basin. However, due to persisting bearish momentum in the distillate market and expectations that gasoline demand over the driving season will lack sufficient strength, the recent positive developments in the gasoline markets are not expected to persist over the coming months.
- OPEC spot fixtures rose in May by 21% compared to the previous month. Sailings from OPEC were marginally higher. The tanker market rebounded in May with a good performance for the Aframax sector. The VLCC sector continued to suffer the most from the global economic crisis and OPEC output adjustments. Clean spot freight rates rose by 37% on average. After reaching a high level, storage at sea lost momentum towards the end of the month due to the narrowing of the contango structure in the crude futures market.
- US commercial oil stocks continued their upward trend in May rising 14.5 mb to stand at 1,102 mb. The build was due mainly to other products, as crude and gasoline stocks fell by 11 mb and 9 mb respectively. European (EU-15 plus Norway) oil stocks rose 7 mb in May to stand at the upper end of the five-year average, the surplus attributed to products. Japan’s commercial oil stocks fell a further 1.7 mb in April before gaining around 7 mb in May, according to preliminary data.
- The demand for OPEC crude in 2008 is estimated to average 30.8 mb/d, a decline of 0.5 mb/d from the previous year. In 2009, the demand for OPEC crude is expected to average 28.6 mb/d, a drop of 2.2 mb/d from a year earlier.