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Crude oil price movements
The OPEC Reference Basket (ORB) averaged higher in July, up by $1.79, or 2.8%, m-o-m reaching $64.71/b, supported by a pick-up in Asian crude demand. Crude oil futures prices also rose from their low levels registered a month earlier as escalating geopolitical tensions offset bearish sentiment in global oil demand. In July, ICE Brent was $1.18, or 1.9%, m-o-m higher, averaging $64.21/b, while NYMEX WTI rose m-o-m by $2.84, or 5.2%, averaging $57.55/b. Year-to-date (y-t-d), ICE Brent was $5.85, or 8.2%, y-o-y lower at $65.87/b, while NYMEX WTI declined by $8.74, or 13.2%, to $57.46/b.
The backwardation in both Brent and Dubai price structures flattened in July due to higher availability in the Atlantic Basin and softer crude demand in the first half of the month. Meanwhile, the contango structure of WTI flattened somewhat on significant declines in US crude oil stocks. Hedge funds and other money managers slightly raised their bullish positions on crude oil in July, with net long positions ending the month marginally higher compared to the low levels recorded in late June.
The global GDP growth for 2019 is now forecast at 3.1%, a slight downward revision from the previous month’s report, while growth remains forecast at 3.2% for 2020. The US economic growth forecast for 2019 is revised down by 0.2 pp to 2.4%, after significant data revisions by the US statistical office. GDP growth for 2020 remains at 2.0%.
The Euro-zone’s growth estimate remains at 1.2% for 2019 and is also forecast at 1.2% in 2020. Japan’s unchanged low growth of 0.5% in 2019 is forecast to continue at the same level in 2020. China’s 2019 growth forecast remains at 6.2% and is expected to slow down to 6.0% in 2020. India’s growth forecast remains unchanged at 6.8% for 2019, and is anticipated to pick up in 2020 to 7.0%. Brazil’s 2019 growth forecast is unchanged at 0.9%, and is projected to reach 1.7% in 2020. After low 1Q19 growth, Russia’s growth forecast for 2019 was revised down by 0.1 pp reaching 1.3%, and remains at 1.4% through2020.
Large uncertainties remain. While the growth forecast currently assumes no further risks until they actually materialise, and, in particular, that trade-related issues do not escalate further, the downside risk to world economic growth is predominant.
World Oil Demand
In 2019, oil demand is anticipated to grow by 1.10 mb/d year-on-year (y-o-y), a downward revision of about 0.04 mb/d from the previous month’s projection, mainly due to weaker-than-expected oil demand data from OECD Americas, Other Asia and the Middle East in 1H19. Total oil demand for the year is now anticipated to reach 99.92 mb/d. For 2020, world oil demand is expected to grow by 1.14 mb/d, in line with last month’s projection, with total world consumption anticipated to average 101.05 mb/d. This forecast is subject to downside risks stemming from uncertainties with regard to global economic development.
The OECD region is estimated to be in positive territory in 2020 as OECD Americas is projected to show growth, while OECD Europe and OECD Asia Pacific are projected to decline. However, non-OECD countries are forecast to continue to account for most of the growth at 1.05 mb/d. China and Other Asia are anticipated to lead demand growth both in the non-OECD region.
World Oil Supply
In 2019, non-OPEC oil supply is anticipated to grow by 1.97 mb/d y-o-y, a downward revision of 72 tb/d from the previous month’s projection, due to lower-than-expected oil production in the US, Brazil, Thailand and Norway in 1H19, which were partially offset by higher production in Canada in 2Q19. US liquids output in May was up by 53 tb/d, despite a decline in crude oil production. However, US oil supply growth for 2019 was revised down to 1.87 mb/d, on lower revised historical production data.
The US, Brazil, China and the UK are the key countries driving y-o-y growth in 2019, with mainly Mexico and Norway showing declines. For 2020, non-OPEC oil supply growth was also revised down by 50 tb/d from the last month assessment, and is now projected to grow by 2.39 mb/d y-o-y for an average 66.78 mb/d, mainly due to a downward revision in the oil supply growth forecast for Brazil.
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