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OPEC bulletin 2/18

MOMR … oil market highlights

January 2018

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

The

OPEC Reference Basket (ORB)

aver-

aged $62.06/barrel in December, its high-

est since June 2015. On the yearly basis, the

ORB averaged $52.43/b, a gain of 29 per

cent or $11.67/b over the previous year. Oil

prices received wide-ranging support from

production adjustment resulting from the

Declaration of Cooperation (DoC), strong

economic and demand growth, as well as

sentiment in the financial markets. ICE

Brent increased $1.23 at $64.09/b, while

NYMEX WTI increased $1.28 at $57.95/b.

The spread between ICE Brent and NYMEX

WTI spread narrowed slightly to $6.15/b in

December. The Brent, WTI and Dubai mar-

ket structure held backwardation. Sweet/

sour differentials widened in Europe and

Asia, and narrowed in the US Gulf Coast.

The

global GDP growth

forecast remains

at 3.7 per cent for both 2017 and 2018. US

growth was revised up in 2018 to 2.6 per

cent, after growth of 2.3 per cent in 2017.

Growth in the Euro-zone was lifted to 2.4

per cent in 2017, followed by 2.1 per cent in

2018. Similarly, Japan’s growthwas lifted in

both 2017 and 2018 to now stand at 1.8 per

cent and 1.6 per cent, respectively. India’s

somewhat softening momentum led to a

slight downward revision to 7.2 per cent in

2018, after growth of 6.5 per cent in 2017.

China’s growth is expected to remain at 6.8

per cent in 2017 and 6.5 per cent in 2018.

Global oil demand

growth in 2017 was

revised upward by 40,000 b/d to stand

at 1.57m b/d, averaging 96.99m b/d for

2017. The upward revision was broadly

a result of better-than-expected data for

OECD Europe and China. For 2018, oil de-

mand growth is anticipated to be around

1.53mb/d, following amarginal upward ad-

justment compared to last month’s report,

with global oil demand now expected to

reach 98.51m b/d. Non-OECD economies

will contribute 1.24m b/d of the demand

growth expected in 2018.

Non-OPEC

oil supply

growth in 2017 has

been revised marginally lower to now

stand at 770,000 b/d. The adjustments

were mostly due to revisions in the actual

data for 4Q17. For 2018, non-OPEC supply

growth was revised up by 160,000 b/d to

now stand at 1.15m b/d, driven by mostly

higher growth expectations for the US and

Canada. OPEC NGLs are also expected to

growby 180,000b/d in 2018, compared to

170,000 b/d growth in the previous year.

OPECproduction inDecember, according to

secondary sources, is expected to increase

by 42,000 b/d to average 32.42m b/d.

Product markets

in the Atlantic Basin con-

tinued to lose ground as refining margins

narrowed further. In the US market, losses

could be attributed to a weakening in the

top and middle of the barrels, which off-

set gains in the diesel complex, driven by

the impact of winter storms on domestic

demand. In Europe, product market plum-

metedwith losses seen across the barrel as

refinery margins hit a 16-month low due to

rising crude prices and supply-side pres-

sure. In Asia, product markets remained at

healthy levels amid firmdomestic demand.

Dirty

tanker

spot freight rates ingeneral did

not show considerable gains in December.

Average dirty tanker spot freight rates was

almost stable from the previous month.

VLCC freight rates declined during the

month as earnings dropped on the back

of high vessels availability. Meanwhile,

tonnage demand remained limited in

December and transit delays sawa decline,

supported by high tonnage availability.

Clean tanker spot freight rates strengthened

West of Suez as a result of a tightening in

vessel supply, mainly in theMediterranean.

Total OECD commercial

oil stocks

fell in

November to stand at 2,933m b. At this lev-

el, OECD commercial oil stocks are about

133m b above the latest five-year average.

Crude andproduct stocks indicate a surplus

of around 114m b and 19m b above their

seasonal norms, respectively. In terms of

days of forward cover, OECD commercial

stocks stand at 61.8 days in November,

some 1.9 days higher than the latest five-

year average.

OPEC crude

in 2017 is estimated at 32.9m

b/d, which is 600,000 b/d higher than

2016. In 2018, OPEC crude is projected at

33.1m b/d, about 200,000 b/d higher than

in the previous year.

The feature article and oil market highlights are taken from OPEC’s Monthly Oil Market Report (MOMR) for January 2018. 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.