Crude Oil Price Movements
The OPEC Reference Basket rose to $53.44/b in September, its highest value since July 2015. Crude futures
prices also saw gains, with ICE Brent averaging above the $55/b, supported by increasing evidence that the oil
market is heading toward rebalancing. Geopolitical tensions and lower distillates stocks also pushed prices higher.
ICE Brent averaged $55.51/b in September, a gain of $3.64, while NYMEX WTI increased $1.82 to average
$49.88/b. Hedge funds raised net long position in ICE Brent and NYMEX WTI futures and options by almost
200,000 contracts. At the end of the month, the Brent crude contract curve had flipped into backwardation through
December 2021. The sweet/sour spread widened significantly in Asia and Europe.
Growth in the world economy continues to improve, with the forecast for 2017 revised up to 3.6% from 3.5%
in last month’s report. Similarly, the 2018 forecast has been adjusted higher to 3.5% from 3.4%. The
improving momentum is visible in all economies, particularly the OECD, which is seen growing by 2.2% in
2017 and by an upwardly revised 2.1% in 2018. US growth in 2018 has been revised up to 2.3% and the EU
to 1.9% for the same year. Russia has also seen an upward revision for 2018 to now stand at 1.6%,
compared to 1.4% in the previous report. Growth expectations for India and China were left unchanged for
both 2017 and 2018.
World Oil Demand
World oil demand growth in 2017 is now expected to increase by 1.5 mb/d, representing an upward revision
of around 30 tb/d from last previous report, mainly reflecting recent data showing an improvement in
economic activities. Positive revisions were primarily a result of higher-than-expected oil demand from the
OECD region and China. In 2018, world oil demand is anticipated to grow by 1.4 mb/d, following an upward
adjustment of 30 tb/d over the previous report, due to the improving economic outlook in the world economy,
particularly China and Russia.
World Oil Supply
Non-OPEC oil supply is expected to grow by 0.7 mb/d in 2017, following a downward revision of 0.1 m/bd
from the previous report. In 2018, the growth in non-OPEC oil supply saw a downward revision of 60 tb/d to
stand at 0.9 mb/d. OPEC NGLs and non-conventional liquids production are seen averaging 6.5 mb/d in
2018, representing an increase of 0.2 mb/d, broadly in line with growth in the current year. In September,
OPEC crude oil production increased by 88 tb/d, according to secondary sources, to average 32.75 mb/d.
Product Markets and Refining Operations
Product markets in the Atlantic Basin improved further in September as the top of the barrel saw support from
higher gasoline demand. Middle distillate markets continue to improve globally on the back of healthy demand,
depleted stocks and along with regional refinery maintenance. However, the bottom of the barrel in Asia and
Europe saw some pressure on low demand and high inventory levels. Product markets are expected to see
support in 4Q17 from healthy demand for winter fuels.
Average dirty vessel spot freight rates rose in September, compared to the previous month, supported by
enhanced activity across several trading routes. Higher Aframax rates were the main driver behind the strength in
sentiment, while average VLCC and Suezmax freight rates showed lesser growth. However, the tanker market
still suffers from oversupply of ships which often cap rates gains. In the clean tanker market, spot freight rates
showed also a positive development mostly attributed to stronger west of Suez market as tonnage demand in the
Mediterranean increased. Additionally, prompt replacements gave a further support to freight rates. Spot freight
rates are expected to strengthen in 4Q17 supported by winter seasonal demand.
Total OECD commercial oil stocks fell in August to stand at 2,996 mb. At this level, OECD commercial oil
stocks are 171 mb above the latest five-year average. Crude and products stocks indicate a surplus of
around 146 mb and 25 mb above the seasonal norm, respectively. In terms of days of forward cover, OECD
commercial stocks stand at 63.2 days in August, 2.6 days higher than the latest five-year average.
Balance of Supply and Demand
Based on the current global oil supply/demand balance, OPEC crude in 2017 is estimated at 32.8 mb/d,
around 0.6 mb/d higher than in 2016. Similarly, OPEC crude in 2018 is projected at 33.1 mb/d, about
0.3 mb/d higher than in 2017.