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OPEC bulletin 3–4/17

MOMR … oil market highlights

March 2017

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

The

OPEC Reference Basket

rose in

February for the third consecutive month,

ending up by about two per cent to average

$53.37/b. Crude futures traded in a rela-

tively narrow range for the second month

in a row. High compliance with supply

adjustments by OPEC and some non-OPEC

producers supported gains. In the crude

futures markets, ICE Brent ended one per

cent higher to average $56/b in February,

while NYMEX WTI increased by 1.6 per

cent to $53.46/b. The Brent-WTI spread

narrowed to $2.53/b, which supported

arbitrage economics to theUS. Speculative

activity hit a fresh record high for the third

month in a row, providing additional sup-

port to oil prices.

Global economic growth

expectations

remain at 3.0 per cent in 2016 and 3.2

per cent in 2017. OECD growth in 2017 is

unchanged at 1.9 per cent, with growth in

theUnitedStates, Euro-zone and Japan see-

ing no revisions. China is expected to grow

by 6.2 per cent in 2017, unchanged fromthe

previous report. India is now expected to

see a slight deceleration, following a mar-

ginal downward revision to 7.0 per cent

in 2017. Russia’s 2017 growth remains at

one per cent, while the forecast for Brazil

was revised slightly higher to 0.5 per cent.

The

world oil demand

growth estimate

for 2016 was revised marginally higher by

around 50,000 b/d to now show growth

of 1.38 million b/d to average 95.05m b/d.

Revisions were driven primarily by higher-

than-anticipated fourth-quarter oil demand

in OECD Europe and the Asia Pacific, as

well as China, whichwas partially offset by

minor downwardadjustments in theMiddle

East. For 2017, oil demand growth is antici-

pated to be around 1.26m b/d, higher by

around 70,000 b/d from previous month

projections, to average 96.31m b/d. The

upward adjustments were due to more

optimistic expectations for oil demand in

OECD Europe, as well as the Asia Pacific.

Non-OPECoil supply

growth is estimated

to have shown a contraction of 660,000

b/d in 2016, in line with the previous

report, to average 57.34m b/d. Higher

fourth-quarter growth in Canada andOther

OECDEuropewas offset by downward revi-

sions in the US, Norway, Australia, Brunei

and Azerbaijan. In 2017, non-OPEC oil sup-

ply is projected to grow by 400,000 b/d,

following an upward revision of 160,000

b/d, to average 57.74m b/d. An improving

outlook for Canadian oil sands andUS sup-

ply were the main contributors to the revi-

sion. OPEC NGLs production in 2017 was

reviseddownby around 20,000b/d tonow

show growth of 130,000 b/d. In February,

OPEC production decreased by 140,000

b/d, according to secondary sources, to

average 31.96m b/d.

Product markets

exhibited a mixed per-

formance in the Atlantic Basin. Higher

export opportunities for gasoline and

strongmiddle distillate demand supported

the European market, while margins fell in

the US due to the weakening seen at the

top and bottom of the barrels. Meanwhile,

refinery margins in Asia continued to be

healthy ahead of the spring refinery main-

tenance season, despite a slight fall, due

to some bearish signals in the gasoline

market.

Dirty tanker spot

freight rates

declined

in February, with rates falling for all ves-

sels on all reported routes. Lower freight

rates were registered on the back of lim-

ited activity, theChineseNewYear holidays

in the East and fleet expansions. VLCC,

Suezmax and Aframax rates declined by 21

per cent on average from a month before.

OECD commercial oil stocks

rose in

January to stand at 3,006mb. At this level,

OECD commercial oil stocks were 278m

b above the five-year average. Crude and

products showed a surplus of around209m

b and 69m b, respectively, above the sea-

sonal norm. In terms of days of forward

cover, OECD commercial stocks stood at

63.8 days, some 4.9 days higher than the

five-year average.

Demand for OPEC crude

in 2016 stood

at 31.6m b/d, some 1.9 mb/d higher than

in the previous year. For 2017, demand

for OPEC crude is projected at 32.4m b/d,

around 700,000 b/d higher than in the

current year.

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