Crude Oil Price Movements
The OPEC Reference Basket averaged $42.68/b in July, representing the first decline in
five months. Lower-than-expected demand, high refined product stocks, and rising crude
supply were the factors behind the $3.16 drop. ICE Brent ended down $3.39 at $46.53/b,
while Nymex WTI fell $4.05 to $44.80/b. Speculators cut long positions further this month in
all markets. The ICE Brent-WTI spread widened to $1.75/b in Brent’s favour during July.
World economic growth remains unchanged at 3.0% for 2016 and 3.1% for 2017. Weak
first half GDP growth in the US caused a downward revision in the 2016 growth forecast to
1.7%, while the 2017 forecast remains at 2.1%. The recently announced fiscal stimulus in
Japan led to an upward revision in growth to 0.9% for both 2016 and 2017. The
Euro-zone’s forecast remains unchanged at 1.5% and 1.2%. Forecasts for China and India
are also unchanged at 6.5% and 7.5% for 2016 and 6.1% and 7.2% for 2017. Both Brazil
and Russia are forecast to rebound from two-year recessions in 2017 with growth of 0.4%
and 0.7% respectively, after declines of 3.4% and 0.8% in 2016.
World Oil Demand
World oil demand growth in 2016 is expected to average 1.22 mb/d, some 30 tb/d higher
than last month. For 2017, world oil demand is forecast to grow by 1.15 mb/d, unchanged
from the previous report. While the OECD will contribute positively to oil demand growth
adding some 0.10 mb/d, the bulk of the growth in 2017 will originate from the non-OECD
with 1.05 mb/d.
World Oil Supply
Non-OPEC oil supply is expected to contract by 0.79 mb/d in 2016, following an upward
revision of 90 tb/d since the previous report, driven by higher-than-expected output in 2Q16
in the US and UK. In 2017, non-OPEC supply is expected to decline by 0.15 mb/d,
following a downward revision of 40 tb/d. OPEC NGL production is forecast to grow by
0.16 mb/d and 0.15 mb/d in 2016 and 2017, respectively. In July, OPEC production
increased by 46 tb/d to average 33.11 mb/d, according to secondary sources.
Product Markets and Refining Operations
Product markets in the Atlantic Basin weakened during July, despite gasoline demand
hitting record levels in the US during the peak of the driving season. The bearish sentiment
was fueled by high gasoline inventories and slowing demand for middle distillates. This
offset the vibrant recovery seen at the bottom of the barrel, which was supported by a
tightening market and caused refinery margins to fall. In Asia, margins continued to decline
due to oversupply at the top and middle of the barrel.
Sentiment in the dirty tanker market was weak in July, mainly on the back of a high surplus
of vessels in different areas. Dirty spot freight rates dropped 19% on average in July,
m-o-m. Clean tanker freight rates declined on both sides of Suez as the demand for clean
tonnage remained thin and market activity was limited. Global spot fixtures increased in
July, and OPEC and Middle East sailings were higher than in the previous month.
OECD total commercial stocks fell in June to stand at 3,045 mb, some 311 mb above the
latest five-year average. Crude and product inventories showed a surplus of 175 mb and
136 mb, respectively. In terms of days of forward cover, OECD commercial stocks in June
stood at 64.9 mb, around 6 days above the latest five-year average.
Balance of Supply and Demand
Demand for OPEC crude in 2016 is estimated at 31.9 mb/d, unchanged from last report
and 1.9 mb/d higher than in the previous year. In 2017, demand for OPEC crude is
forecast at 33.0 mb/d, in line with the previous report and 1.2 mb/d higher than in 2016.