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OPEC bulletin 8–9/17

MOMR … oil market highlights

July 2017

M a r k e t R e v i e w

The

OPEC Reference Basket

declined 8.1

per cent in June to $45.21/barrel. Year-to-

date, the ORB value was 38.3 per cent higher

at $50.21/b. Crude futures tumbled in a bear

market. ICE Brent settled down 7.5 per cent

to $47.55/b and NYMEXWTI dropped 6.9 per

cent to $45.20/b, on concerns about rising

global supply. Year-to-date, ICE Brent and

NYMEX WTI prices were 28 per cent and 26

per cent higher, respectively. The ICE Brent-

NYMEX WTI spread narrowed to $2.36/b.

Money managers embarked on a new cycle

of short-selling in June, which added to the

downward pressure on prices.

World economic growth

in 2018 is fore-

cast at 3.4 per cent, the same level of growth

forecast for 2017. This reflects a continued

strengthening of the global recovery which

is becoming more balanced, with stability in

the oil market remaining a key determinant.

OECD growth is forecast at a slightly lower

level of 1.9 per cent in 2018, compared to 2.0

per cent in 2017. India is forecast to grow by

7.5 per cent in 2018, compared to 7.0per cent

in 2017. Brazil and Russia are both forecast

to expand their recovery to 1.5 per cent and

1.4 per cent, respectively, compared to 0.5

per cent and 1.2 per cent in 2017. China will

continue to grow at a slightly lower, but still

considerable 6.2 per cent in 2018, compared

to 6.6 per cent in 2017.

Global growth

in 2017 is expected to be

around 1.27 million barrels/day, broadly

unchanged from previous month, to average

96.4m b/d. The latest data shows demand

in India and China have remained robust,

reflecting healthy manufacturing and road

construction activities in the former, and ris-

ing demand in the transportation and indus-

trial sectors in the latter. For 2018, world oil

demand is anticipated to rise by 1.26m b/d,

slightly below the current year’s growth, to

average 97.6m b/d. The OECD is expected to

see growth of 200,000 b/d, while the non-

OECD is forecast to increase by 1.07m b/d.

Non-OPEC

oil supply

growth was revised

marginally lower to 800,000 b/d in 2017,

averaging 57.82m b/d. The downward revi-

sion was mainly driven by expected lower

OECD oil supply in 2H17. For 2018, non-OPEC

oil supply is expected to grow by 1.14m b/d

to average 58.96m b/d. US, Brazil, Canada,

Russia, Kazakhstan, Congo and the UK are

expected to be the main drivers of growth,

while declines are foreseen inMexico, China,

Colombia and Azerbaijan. OPEC NGLs pro-

duction in 2018 is expected to grow by a

higher 180,000 b/d to average 6.49m b/d,

partly due to Equatorial Guinea joiningOPEC.

In June, OPEC crude production rose by

393,000 b/d to average 32.61m b/d, accord-

ing to secondary sources.

Refinery margins

in the US declined fur-

ther in June, as the US gasoline crack spread

dropped despite the onset of the summer

driving season. High inventory levels added

to the weakness in the middle of the barrel,

outpacing increases in the gasoil cracks.

Meanwhile, in Europe and Asia, margins

inched up on healthy demand amid addi-

tional export opportunities outpacing plen-

tiful supply.

Dirty

tanker spot freight rates

were weak

in general in June. VLCC freight rates declined

six per cent, while the drop in Suezmax and

Aframax spot rates was greater, falling by 20

per cent each, compared to May. The decline

in dirty tanker spot freight rates came on

the back of growing tonnage availability, as

the market was not active enough to absorb

the expansion in capacity. Similarly, clean

tanker sentiment showed no improvements

on average in June.

Total

OECDcommercial oil stocks

fell inMay

to stand at 3,015mb. At this level, OECD com-

mercial oil stocks are 234mb above the latest

five-year average. Crude and product stocks

indicate a surplus of around 148mb and 86m

b above the seasonal norm, respectively. In

termsof daysof forwardcover, OECDcommer-

cial stocks stood at 63.5days inMay, some 3.6

days higher than the latest five-year average.

Demand for OPEC crude

in 2017 is esti-

mated at 32.3mb/d, representing an increase

of 300,000 b/d over the 2016 level. In 2018,

the demand for OPEC crude is projected at

32.2m b/d, around 100,000 b/d less than

this year.

The feature article and oil market highlights are taken from OPEC’s Monthly Oil Market Report (MOMR) for July 2017. Published by the

Secretariat’s Petroleum Studies Department, the publication may be downloaded in PDF format from our Website

(www.opec.org)

,

provided OPEC is credited as the source for any usage. The additional graphs and tables on the following pages reflect the latest data on

OPEC Reference Basket and crude and oil product prices in general.