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Oil Market Report: Product supply increasing again

Oil Market Report: Product supply increasing again

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Published by SEB Group
The global oil demand forecast has been progressively reduced, and it is hard to imagine the situation changing in the foreseeable future, says SEB’s experts in a new Oil Market Report. Meanwhile, long-term supply continues to increase.
The global oil demand forecast has been progressively reduced, and it is hard to imagine the situation changing in the foreseeable future, says SEB’s experts in a new Oil Market Report. Meanwhile, long-term supply continues to increase.

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Published by: SEB Group on Nov 22, 2012
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12/04/2012

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Oil Market Report
Product supply increasing again afterpre-winter refinery maintenance
 
22 NOVEMBER 2012
 
 2
 
SEB Oil Market Report
Crude oil market
Since its first release in July 2011, the IEA 2012 global oildemand forecast has been progressively reduced by1.4 mb/d. Given current high macroeconomicheadwinds and/or uncertainties affecting all majorregional markets, it is hard to imagine the situationchanging in the foreseeable future. In addition,expected long-term supply continues to increase astight US oil production has exceeded expectations.Taking mainly these factors into account we recentlylowered our Brent crude oil price forecast with riskskewed to the downside. Nevertheless, we stillanticipate record high global oil consumption in 2012.While marginal unconventional barrels remainexpensive to produce, middle distillate marketscontinue tight, geopolitical risk is extraordinarily high,and oil producers retain strong incentives to defendprices. Given all these factors, a deep, prolongeddownturn in the oil market appears neither imminentnor likely unless the risk of a global recession increasessignificantly.
While most recent data suggest the oil market was relativelybalanced in Q3-12, there appears to be an oversupply ofaround 1 mb/d in the current quarter, partly due to lowerconsumption as a result of Hurricane Sandy and reactivationof North Sea production following maintenance. Overall,current OECD industry oil stocks are well above their fiveyear average due to high North American and Asian crudeoil stocks. Conversely, global oil product stocks are belownormal.The International Energy Agency’s (IEA) World EnergyOutlook was optimistic regarding tight US oil production,which it now expects will increase from approximately 1mb/d in 2011 to over 4 mb/d by the mid-2020s. As a result,the US may replace Saudi Arabia as the world’s largest oilproducer by around 2020 and become virtually energy self-sufficient by the mid-2030s. Furthermore, North Americacould become a net exporter by around 2030. However,considering the novelty of tight oil production considerableuncertainty still surrounds these projections, e.g. regardingnon-US potential and the life span of such resources.Geopolitical conditions in the MENA region continue todeteriorate, Gaza being the latest example and a source ofsignificant market turbulence since the present conflictbegan. At the time of writing a ceasefire has at leastpostponed an Israeli ground invasion though the situationwill probably remain tense until a more far reaching peaceagreement is in place. Meanwhile, the civil war in Syria isincreasingly impacting surrounding countries, such asTurkey, Lebanon and Israel. Other conflicts also remainunresolved, including Iran, Egypt and Bahrain, and couldrevive at any time even though attention is currentlyfocused elsewhere.
Crude oil price
(NYMEX/ICE, $/b, front month, daily closing)
65707580859095100105110115120125130
    j   a   n  -    1    0    f   e    b  -    1    0   m   a   r  -    1    0   a   p   r  -    1    0   m   a    j  -    1    0    j   u   n  -    1    0    j   u    l  -    1    0   a   u   g  -    1    0   s   e   p  -    1    0   o    k    t  -    1    0   n   o   v  -    1    0    d   e   c  -    1    0    j   a   n  -    1    1    f   e    b  -    1    1   m   a   r  -    1    1   a   p   r  -    1    1   m   a    j  -    1    1    j   u   n  -    1    1    j   u    l  -    1    1   a   u   g  -    1    1   s   e   p  -    1    1   o    k    t  -    1    1   n   o   v  -    1    1    d   e   c  -    1    1    j   a   n  -    1    2    f   e    b  -    1    2   m   a   r  -    1    2   a   p   r  -    1    2   m   a    j  -    1    2    j   u   n  -    1    2    j   u    l  -    1    2   a   u   g  -    1    2   s   e   p  -    1    2   o    k    t  -    1    2   n   o   v  -    1    2
NYMEXWTIICE Brent
 
IEA global crude oil demand estimates
(mb/d)
 
7980818283848586878889909192
    j   u    l  -    0    9   o    k    t  -    0    9    j   a   n  -    1    0   a   p   r  -    1    0    j   u    l  -    1    0   o    k    t  -    1    0    j   a   n  -    1    1   a   p   r  -    1    1    j   u    l  -    1    1   o    k    t  -    1    1    j   a   n  -    1    2   a   p   r  -    1    2    j   u    l  -    1    2   o    k    t  -    1    2
2010 2011 2012 2013
Chart Sources: IEA, Bloomberg, SEB Commodity Research
Current global crude oil demand estimates
2012
(mb/d)
Revision
(kb/d)
2013
(mb/d)
Revision
(kb/d)
IEA
89.6 -80 90.4 -70
EIA
89.05 -40 89.94 -70
OPEC
88.80 -10 89.57 -20
SEB average Brent crude oil price forecast
($/b)
Q1
 
Q2
 
Q3 Q4
 
FullYear
 
2012
- - - 110 111.7
2013
105 105 110 110 107.5
2014
- - - - 110.0
2015
- - - - 115.0
 
 3
 
SEB Oil Market Report
Crude oil
Crude oil price
(NYMEX/ICE, $/b, front month, weekly closing)
 
12 month time spread
(NYMEX/ICE, %, daily closing, >0: contango, <0: backwardation)
102030405060708090100110120130140150
    2    0    0    3    2    0    0    4    2    0    0    5    2    0    0    6    2    0    0    7    2    0    0    8    2    0    0    9    2    0    1    0    2    0    1    1    2    0    1    2
NYMEXWTIICE Brent-10-8-6-4-2024681012141618
    j   a   n  -    1    0    f   e    b  -    1    0   m   a   r  -    1    0   a   p   r  -    1    0   m   a    j  -    1    0    j   u   n  -    1    0    j   u    l  -    1    0   a   u   g  -    1    0   s   e   p  -    1    0   o    k    t  -    1    0   n   o   v  -    1    0    d   e   c  -    1    0    j   a   n  -    1    1    f   e    b  -    1    1   m   a   r  -    1    1   a   p   r  -    1    1   m   a    j  -    1    1    j   u   n  -    1    1    j   u    l  -    1    1   a   u   g  -    1    1   s   e   p  -    1    1   o    k    t  -    1    1   n   o   v  -    1    1    d   e   c  -    1    1    j   a   n  -    1    2    f   e    b  -    1    2   m   a   r  -    1    2   a   p   r  -    1    2   m   a    j  -    1    2    j   u   n  -    1    2    j   u    l  -    1    2   a   u   g  -    1    2   s   e   p  -    1    2   o    k    t  -    1    2   n   o   v  -    1    2
ICE BrentNYMEXWTI
 
Brent futures curve
(ICE, $/b)
WTI futures curve
(NYMEX, $/b)
92949698100102104106108110112
    j   a   n  -    1    3   a   p   r  -    1    3    j   u    l  -    1    3   o    k    t  -    1    3    j   a   n  -    1    4   a   p   r  -    1    4    j   u    l  -    1    4   o    k    t  -    1    4    j   a   n  -    1    5   a   p   r  -    1    5    j   u    l  -    1    5   o    k    t  -    1    5    j   a   n  -    1    6   a   p   r  -    1    6    j   u    l  -    1    6   o    k    t  -    1    6    j   a   n  -    1    7   a   p   r  -    1    7
12-09-2112-10-1912-11-2186878889909192939495
    j   a   n  -    1    3   a   p   r  -    1    3    j   u    l  -    1    3   o    k    t  -    1    3    j   a   n  -    1    4   a   p   r  -    1    4    j   u    l  -    1    4   o    k    t  -    1    4    j   a   n  -    1    5   a   p   r  -    1    5    j   u    l  -    1    5   o    k    t  -    1    5    j   a   n  -    1    6   a   p   r  -    1    6    j   u    l  -    1    6   o    k    t  -    1    6    j   a   n  -    1    7
12-09-2112-10-1912-11-21
 
Speculative positions WTI
(NYMEX, lots, futures and options, weekly data)
 
Benchmark spreads
(daily closing)
050000100000150000200000250000300000350000400000450000
    2    0    0    7    2    0    0    8    2    0    0    9    2    0    1    0    2    0    1    1    2    0    1    2
ShortLongNet-28-26-24-22-20-18-16-14-12-10-8-6-4-202468
    j   a   n  -    1    0    f   e    b  -    1    0   m   a   r  -    1    0   a   p   r  -    1    0   m   a    j  -    1    0    j   u   n  -    1    0    j   u    l  -    1    0   a   u   g  -    1    0   s   e   p  -    1    0   o    k    t  -    1    0   n   o   v  -    1    0    d   e   c  -    1    0    j   a   n  -    1    1    f   e    b  -    1    1   m   a   r  -    1    1   a   p   r  -    1    1   m   a    j  -    1    1    j   u   n  -    1    1    j   u    l  -    1    1   a   u   g  -    1    1   s   e   p  -    1    1   o    k    t  -    1    1   n   o   v  -    1    1    d   e   c  -    1    1    j   a   n  -    1    2    f   e    b  -    1    2   m   a   r  -    1    2   a   p   r  -    1    2   m   a    j  -    1    2    j   u   n  -    1    2    j   u    l  -    1    2   a   u   g  -    1    2   s   e   p  -    1    2   o    k    t  -    1    2   n   o   v  -    1    2
WTI minus BrentBrent minus DubaiBrent minus Urals
Chart Sources: Bloomberg, SEB Commodity Research

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