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Oil Market Highlights
Crude Oil Price MovementsThe OPEC Reference Basket (ORB) rebounded in January, gaining more than 3%, or $1.80 month-on-month (m-o-m), to average $58.74/b.
Crude oil prices improved over the month, buoyed by robust market fundamentals with signs of tightening crude supply as well as firm crude oil demand, particularly from Asia-Pacific. In January, ICE Brent was on average higher by $2.57, or 4.4%, m-o-m at $60.24/b, while NYMEX WTI rose m-o-m by $2.57, or 5.2%, to average $51.55/b.
The Brent contango structure flattened as the market moved toward balance, while the WTI structure remained in significant contango, reflecting US market fundamentals. The DME Oman forward curve remained in backwardation.
The global economic growth forecast was revised down to 3.3% for 2019 and 3.6% in 2018. In the OECD, 2019 US growth was revised lower to 2.5%, following growth of 2.9% in 2018. Euro-zone growth was also revised down to 1.3% for 2019, after growth of 1.8% in 2018.
Japan’s growth forecast remained at 1.0% for 2019 and stands at 0.8% in 2018. In the non-OECD countries, China’s growth forecast of 6.1% in 2019 remains unchanged from the previous month, following slightly better than expected growth in 2018 of 6.6%. India’s growth forecast remained at 7.2% for 2019, after 7.5% in 2018. Growth in Brazil remains unchanged at a forecast 1.8% for 2019, following 1.1% in 2018. Russia’s 2019 GDP growth forecast was revised down slightly to 1.6%, the same growth level as seen in 2018.
While some positive signals still support global economic growth at around the current forecast level, underlying risks continue, considering ongoing trade tensions, monetary policies and ongoing challenges in several emerging and developing economies.
World Oil Demand
In 2018, the estimate for world oil demand growth was revised lower by a slight 0.03 mb/d from last month’s report. This came as a result of slower than expected demand growth from OECD-Europe and Asia Pacific as well as from non-OECD Other Asia and the Middle East.
Total world oil demand growth in 2018 is estimated at 1.47 mb/d, for an average of 98.78 mb/d for the year. For 2019, oil demand growth is forecast at around 1.24 mb/d, slightly lower than the previous month’s assessment by 0.05 mb/d to reach an average of 100.00 mb/d. The downward revision is mainly an outcome of lower economic expectations in 2019 for the OECD Americas and Europe, as well as Latin America and the Middle East.
World Oil Supply
Non-OPEC oil supply growth in 2018 was revised up by 0.11 mb/d from the previous month’s report, mainly due to adjustments for US, Canada, Malaysia, China and UK supply, and is now estimated at 2.72 mb/d, with total supply averaging 62.17 mb/d for the year. Key growth drivers in 2018 were the US with 2.24 mb/d,along with Canada, Russia, Kazakhstan, Qatar, Ghana and the UK, while Mexico, Norway and Vietnam showed the largest declines.
The non-OPEC oil supply growth forecast for 2019 was also revised up by 0.08 mb/d to 2.18 mb/d, mainly due to a revised production forecast for the US Gulf of Mexico. Total non-OPEC supply for the year is projected to average 64.34 mb/d. The US, Brazil, Russia, the UK, Australia, Kazakhstan and Ghana are expected to be the main drivers, while Mexico, Canada, Norway, Indonesia and Vietnam are projected to see the largest declines. OPEC NGLs and non-conventional liquids are estimated to have grown by 0.04 mb/d in 2018 to average 4.98 mb/d, and forecast to grow by 0.09 mb/d in 2019 to average 5.07 mb/d.
In January 2019, OPEC crude oil production decreased by 797 tb/d to average 30.81 mb/d, according to secondary sources.Product Markets and Refining OperationsGlobal product markets continued to lose ground in January for the second consecutive month. In the US, soaring gasoline stocks, along with poor fuel oil performance affected by lower FCC margins, offset support from strong heating oil demand.
In Europe, product markets weakened across the barrel as arbitrage openings into the region pressured margins and outweighed support from a pick-up in diesel and fuel oil demand. In Asia, weakening naphtha and jet/kerosene markets dragged on margins, as a growing gasoline surplus reduced gasoline margins to a new multi-year low.
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