OPEC reports drop in January oil output, revises oil demand growth upwards


Crude Oil Price Movements
The OPEC Reference Basket averaged $52.40/b in January, representing a gain of 73¢ over the previous month. NYMEX WTI and ICE Brent also saw gains, increasing by 44¢ and 53¢ to average $52.61/b and $55.45/b, respectively. Production adjustments by OPEC and some non-OPEC producers supported the market, although gains were capped by increased drilling activity in the US. The Brent-WTI spread widened slightly to average $2.84/b in January.

World Economy
Global economic growth expectations remain at 3.0% in 2016 and 3.2% in 2017. OECD growth in 2017 was revised up to 1.9%, following upward adjustments in the Euro-zone and UK. US economic growth remains unchanged at 2.2%. Forecasts for China and India in 2017 also remain unchanged at 6.2% and 7.1%, respectively. Russia’s 2017 growth was revised up to 1.0%, while Brazil’s growth forecast remains unchanged at 0.4%.

World Oil Demand
World oil demand growth in 2016 is expected to increase by 1.32 mb/d, following an upward adjustment of 70 tb/d to reflect continued better-than-expected consumption in OECD Europe and Asia Pacific. Total oil demand is now estimated to average 94.62 mb/d, taking into account base line adjustments to China of around 0.12 mb/d. In 2017, world oil demand growth is seen to reach 1.19 mb/d, representing an upward revision of 35 tb/d to now average 95.81 mb/d.

World Oil Supply
Non-OPEC oil supply growth in 2016 has been revised up by 50 tb/d to now show a contraction of 0.66 mb/d on higher-than-expected output in 4Q16. In 2017, non-OPEC supply growth has been revised up by 120 tb/d to now show an increase of 240 tb/d, due to a pick up in drilling activities and investment in the US. OPEC NGL production is forecast to grow by 0.15 mb/d in 2017, following growth of 0.15 mb/d in 2016. In January, OPEC production decreased by 890 tb/d, according to secondary sources, to average 32.14 mb/d.

Product Markets and Refining Operations
Product markets in the Atlantic Basin received support in January from the top of the barrel on the back of higher export opportunities in gasoline and naphtha. This, along with the positive performance at the bottom of the barrel, allowed refinery margins to remain healthy. Meanwhile, margins in Asia strengthened on the back of firm regional demand.

Tanker Market
Spot freight rates continued to recover in January, showing general m-o-m improvements across all tanker sectors. Gains were mainly driven by a firmer market in West Africa, the Middle East and the Mediterranean, along with delays due to congestion in the Turkish Straits and severe weather conditions. Freight rates rose in January, despite a general decline in chartering activity.

Stock Movements
Total OECD commercial oil stocks fell in December 2016 to stand at 2,999 mb. At this level, OECD commercial oil stocks are 299 mb above the five-year average. Crude and products showed surpluses of around 216 mb and 83 mb, respectively. In terms of forward cover, OECD commercial stocks stood at 63.9 days, some 5.5 days higher than the five-year average. Balance of Supply and Demand Demand for OPEC crude in 2016 averaged 31.3 mb/d, an increase of 1.8 mb/d over the previous year. In 2017, demand for OPEC crude is projected to average 32.1 mb/d, around 0.8 mb/d higher than last year.

Source: OPEC

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