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OPEC bulletin 8–9/17

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

MOMR … oil market highlights

August 2017

The

OPEC Reference Basket

averaged

$46.93/barrel in July, representing a gain of

about four per cent m-o-m. Y-t-d, the Basket

was almost 34per cent higher at $49.75/b. Oil

futures in NewYork and London recovered in

July, both ending themonth above $50/b, sup-

ported by falling inventories, higher demand

and stronger refining margins. NYMEX WTI

improved 3.3 per cent to $46.68/b and ICE

Brent ended 3.4 per cent higher at $49.15/b.

Y-t-d, bothweremore than 22 per cent higher.

The Brent-WTI spread widened to $2.47/b in

July, despite successive weeks of US crude

inventory draws. In July, short covering, rather

than increased long positions, drove oil prices

higher, as hedge funds reduced short posi-

tions by the equivalent of 163m b.

The forecasts for

worldeconomic growth

in

2017 and 2018 remain unchanged from the

previous report at 3.4 per cent. OECD growth

has performed better than anticipated in the

current year, particularly the Euro-zone, and

is forecast to grow by 2.0 per cent in 2017

and 2018. India is expected to growby 7.0per

cent in 2017 and 7.5 per cent in 2018. Brazil

and Russia are both forecast to expand their

recovery to 0.5 per cent and 1.2 per cent in

2017, respectively, and 1.5 per cent and 1.4

per cent in 2018. China has performed bet-

ter than expected so far this year and is now

forecast to grow by 6.7 per cent in 2017 and

by 6.3 per cent in 2018.

World oil demand

growth in 2017 is now

expected at 1.37m b/d, following an upward

revision of 100,000 b/d mainly to reflect

better-than-expected data from OECD

regions for 2Q17. Total oil demand antici-

pated to average 96.49m b/d this year. For

2018, global oil demand growth is projected

to increase by 1.28mb/d, slightly higher than

last month’s projections, with total world

consumption averaging 97.77m b/d. OECD

will contribute positively to oil demand in

2018, adding some 210,000 b/d, and non-

OECD economies will make up the lion’s

share with 1.07m b/d.

Non-OPEC

oil supply growth

in 2017 was

revised down by 28,000 b/d to stand at

780,000 b/d, representing a total non-OPEC

supply of 57.77mb/d. Weaker-than-expected

output in OECD America in 2Q17 was the

main reason for the downward adjustment.

For 2018, the non-OPEC oil supply growth

forecast was also revised down by 42,000

b/d to 1.10m b/d to average 58.87m b/d. The

US, Brazil and Canada are expected to be the

main drivers of growth, offsetting declines

in Mexico, China, Columbia and elsewhere.

OPEC NGL production is expected to grow

by 180,000 b/d to average 6.49m b/d in

2018. In July, OPEC production increased by

173,000 b/d to average 32.87m b/d, accord-

ing to secondary sources.

Refinery margins

in the Atlantic Basin

saw mixed movements in July. US margins

recorded solid gains as crack spreads for all

products increased due to healthy domes-

tic demand. In contrast, margins in Europe

weakened in response to products oversup-

ply, limited export opportunities and higher

feedstock costs. Meanwhile, margins in Asia

strengthened, supported by robust seasonal

demand.

Dirty

tanker spot freight rates

mostly expe-

rienced negative developments in July, or

remained at the previously low levels. VLCC

and Suezmax average spot freight rates

stayed almost flat compared with the pre-

vious month, while Aframax rates dropped

by six per cent compared to a month earlier.

The declinewas due to low tonnage demand,

limited inquiries, new tanker deliveries and

port maintenance.

Total

OECD commercial oil stocks

fell in

June to stand at 3,033mb. At this level, OECD

commercial oil stocks are 252m b above the

latest five-year average. Crude and product

stocks indicate a surplus of around 142m b

and 110mb above the seasonal norm, respec-

tively. In terms of days of forward cover,

OECD commercial stocks stood at 63.8 days

in June, some 4.1 days higher than the five-

year average.

Demand for OPEC crude

in 2017 is esti-

mated to stand at 32.4mb/d, some 400,000

b/d higher than the 2016 level. In 2018,

demand for OPEC crude is forecast at 32.4m

b/d, at the same level as in 2017.

The feature article and oil market highlights are taken from OPEC’s Monthly Oil Market Report (MOMR) for August 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.