Other Asia, led by India, is anticipated to be the main contributor to oil demand growth in 2016
OPEC Monthly Oil Market ReportCrude Oil Price Movements
The OPEC Reference Basket averaged $43.21/b in May, representing a gain of $5.35 over the previous month. ICE Brent ended up $4.31 at $47.65/b, while Nymex WTI rose $5.67 to $46.80/b. The ICE Brent-Nymex WTI spread narrowed significantly to 85/b in May from $2.21/b the month before.
World Economy
World economic growth is forecast at 3.1% for this year, after estimated growth of 2.9% the year before, both unchanged from the previous month. OECD growth in 2016 remains at 1.9%, slightly below the 2.0% seen in 2015. The forecast for the major emerging economies remains unchanged. China and India continue to expand this year at a considerable level of 6.5% and 7.5%, respectively. Brazil and Russia, however, are forecast to remain in recession this year, contracting by 3.4% and 1.1%, respectively.
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World Oil Demand
World oil demand growth for 2016 remains unchanged from the previous report at 1.20 mb/d to average 94.18 mb/d. Other Asia, led by India, is anticipated to be the main contributor to oil demand growth in 2016. Similar to 2015, transportation fuels, supported by healthy vehicle sales and the low oil price environment, are projected to provide the bulk of expected growth. The 2015 growth estimate was also left unchanged at 1.54 mb/d to average 92.98 mb/d.
World Oil Supply
The forecast for non-OPEC oil supply in 2016 remains unchanged, with a contraction of 0.74 mb/d expected to average 56.40 mb/d. The downward revisions in Canada, Brazil and Colombia broadly offset upward revisions in the US, UK, Russia and Azerbaijan. Non-OPEC supply growth in 2015 was left unchanged at 1.47 mb/d. OPEC NGLs and non-conventionals are expected to increase by 0.16 mb/d to average 6.29 mb/d this year. In May, secondary sources show OPEC crude oil production decreased by 0.1 mb/d to average 32.36 mb/d.
Product Markets and Refining Operations
The high level of inventories in light and middle distillates, along with the approaching end of the spring maintenance season, offset the potential impact from events in Canada and France. This caused margins to edge lower in the Atlantic Basin, despite stronger gasoline demand in the region. Meanwhile, in Asia, refinery margins showed a slight recovery on the back of stronger regional gasoline and gasoil demand amid a peak in refinery maintenance.
Tanker Market
Sentiment in the dirty tanker market was generally weak in May. VLCC and Suezmax spot freight rates declined on the back of light tonnage demand and increased tanker availability. However, Aframax spot freight rates improved. Clean tanker freight rates declined on average, as a result of low freight rates reported for West of Suez. In May, global chartering activities dropped and sailings from the Middle East, and OPEC more broadly, were lower month-on-month.
Stock Movements
OECD commercial oil stocks rose slightly in April to stand at 3,046 mb. At this level, OECD commercial oil stocks are around 338 mb above the latest five-year average, with crude indicating a lower surplus of 194 mb and products broadly flat at 144 mb. In terms of days of forward cover, OECD commercial stocks stood at 66.4 days, some 7.1 days higher than the five-year average.
Balance of Supply and Demand
Demand for OPEC crude in 2016 is projected at 31.5 mb/d, unchanged from the last report and 1.8 mb/d higher than last year. For 2015, demand for OPEC crude is also unchanged, averaging 29.7 mb/d, which represents a decline of 0.1 mb/d from the previous year.
Estimate for 2015
Demand for OPEC crude for 2015 remained unchanged from the previous month to stand at 29.7 mb/d, representing a decline of 0.1 mb/d from the 2014 level. All quarters remained unchanged. 1Q15 fell by 0.8 mb/d, while 2Q15 and 3Q15 remained flat versus the same quarters last year. 4Q15 rose by 0.4 mb/d y-o-y.
Forecast for 2016
Demand for OPEC crude for 2016 remained unchanged from the previous MOMR and is projected to increase by 1.8 mb/d to average 31.5 mb/d. Within the quarters, both 1Q16 and 4Q16 were revised down by 0.2 mb/d and 0.1 mb/d, respectively, while 2Q16 was revised up by 0.1 mb/d. 3Q16 remained unchanged. 1Q16 and 2Q16 are expected to increase by 1.0 mb/d and 2.1 mb/d, respectively, while 3Q16 and 4Q16 are both projected to increase, rising by 2.2 mb/d and 1.8 mb/d, respectively.
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