Crude oil futures plunged sharply again to multi-month lows, with ICE Brent ending at $48.21/b and Nymex WTI at $42.89/b, according to Organization of the Petroleum Exporting Countries (OPEC)
The OPEC Reference Basket fell below $50/b in August to average $45.46/b, mostly attributed to sell-offs amid enduring oversupply and Chinese economic turbulence. Crude oil futures plunged sharply again to multi-month lows, with ICE Brent ending at $48.21/b and Nymex WTI at $42.89/b. Speculators continued to be bearish in August with net-long positions in oil futures and options at record lows. The Brent- WTI spread narrowed about 52¢ to $5.32/b in August.
World Oil Demand
In 2015, world oil demand growth is expected to be around 1.46 mb/d after an upward revision of around 84 tb/d, mainly to reflect better-thanexpected data from OECD region. In 2016, world oil demand is anticipated to rise by 1.29 mb/d after a downward revision of around 50 tb/d.
World Oil Supply
Non-OPEC oil supply is expected to grow by 0.88 mb/d in 2015, following a downward revision of around 72 tb/d, due to lower-than-expected output in the US. In 2016, non- OPEC oil supply is expected to increase slightly by 0.16 mb/d, a downward revision of 110 tb/d from the previous report. OPEC NGLs are expected to grow by 0.19 mb/d in 2015 and 0.17 mb/d in 2016. In August, OPEC crude production averaged 31.54 mb/d, according to secondary sources.
Product Markets and Refining Operations
Product markets in the Atlantic Basin showed a mixed performance. Bearish sentiment, fueled by the approaching end of the driving season, caused US refinery margins to drop, while in Europe, margins remained healthy on the back of some recovery in the middle of the barrel. Asian margins showed a slight recovery in middle distillates on strong regional demand amid some run cuts, partially easing concerns over product oversupply.
Bearish sentiment dominated the dirty tanker market in August with freight rates for VLCCs, Suezmax and Aframax registering a drop from the previous month. Freight rates declined, mainly as a result of tonnage availability while
tonnage demand remains limited. Average clean tanker freight rates were down, mainly on the back of lower freight rates and market activity in west of Suez. In August, OPEC spot fixtures rose to average 12.20 mb/d, and OPEC sailings increased to stand at 24.11 mb/d.
OECD commercial oil stocks rose further in July to stand at 2,925 mb. At this level, they were 202 mb higher than the latest five-year average, with crude and products indicating a surplus of around 163 mb and 39 mb, respectively. In terms of days of forward cover, OECD commercial stocks stood at 63.3 days, 4.8 days above the latest five-year average.
Balance of Supply and Demand
Demand for OPEC crude is estimated at 29.3 mb/d in 2015,0.1 mb/d higher than the previous assessment and up by 0.4 mb/d from the previous year. In 2016, required OPEC crude is projected at 30.3 mb/d, 0.2 mb/d higher than the
previous month’s assessment, and around 1.0 mb/d above the estimated level of this year.
According to OPEC, the world economic growth has been revised down to 3.1% for 2015 and to 3.4% for 2016.
While OECD growth remains unchanged at 2.0% for 2015 and 2.1% in 2016, major emerging economies are increasingly facing challenges. China’s and India’s growth forecasts have been revised down by 0.1 percentage points
to now stand at 6.8% and 6.4% for China and at 7.4% and 7.6% for India in 2015 and 2016, respectively.