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Monthly Oil Market Report
May 2009
1
Oil Market Highlights
The
OPEC Reference Basket
gained $4.42/b or 10% to average $50.20/b in April. Prices movedhigher on improved sentiment over the economic recovery amid prosperous indicators. Equity marketfluctuations and the weakening US dollar prompted an influx of investment into the energy futures.This improvement came despite the persistent deterioration in demand. The Basket continued tostrengthen into May, reaching $56.76/b on 12 May.
Growth for the
global economy
in 2009 has been revised down further by 0.6 percentage points tonow show a decline of 1.4%. The Euro-zone slipped deeper into recession; as a result the forecast hasbeen revised down by 1.2 pp for a decline of 4.2%. Despite some positive signs, the US is stillexpected to decline at a rate of 2.8%, down 0.2 pp from the previous forecast. Growth expectationsfor China and India remain unchanged at 6.5% and 5.0% respectively. In general, it remains to beseen whether the current positive momentum is sustainable and whether the measures taken bycentral banks and governments will be enough to support an economic recovery.
World oil demand
growth is estimated to have declined by 0.3 mb/d in 2008, broadlyunchanged from the previous assessment. The forecast for world oil demand growth in 2009 hasbeen revised down by 0.2 mb/d to now stand at 1.6 mb/d, due to the continued deterioration inthe world economy. Global oil demand growth reached a record low at -2.4 mb/d in the firstquarter. Around 95% of the total decline in oil demand is attributed to OECD while non-OECDgrowth has remained roughly flat.
Non-OPEC oil supply
is estimated to have declined by 0.2 mb/d in 2008, unchanged from theprevious report. In 2009, non-OPEC supply is now expected to grow 0.2 mb/d, indicating a slightdownward revision from the last report. The adjustment was due to announced projects delays, therelease of actual production data and heavier-than-expected declines. In April, total
OPEC crudeproduction
averaged 28.1 mb/d, an increase of 0.2 mb/d over the previous month.
Gasoline stock draws in the US in the latter part of April and reduced output due to seasonal refineryturnarounds have provided support for sentiment in the
product markets
and refining margins inApril. However, due to persisting slowing demand for middle distillates and few signs of highergasoline demand, the recent positive developments in the product markets are likely to be short-livedand would therefore not be able to support crude prices over the coming months.
OPEC spot fixtures
in April rose by 2.4% compared to the previous month. Sailings from OPECwere marginally lower, but arrivals in the US gained 3%. In April, the tanker market witnessed theweakest month so far this year. The continued global economic crisis and OPEC production cutswere once again the dominant drivers behind the weakness in the tanker market. Despite increasedstoring at sea in April, dirty freight rates ended the month with a 28% decline compared to March.Clean spot freight rates declined by 24% over the same period with a much weaker market to the Eastof Suez.
US commercial
oil stocks
surged 34 mb in April to stand at 1,087 mb, resulting in a huge overhangof 105 mb with the five-year average. Crude oil accounted for nearly 15 mb or 0.5 mb/d to the buildand hit a new record of 375 mb, the highest since the mid-1990s. European (EU-15 plus Norway)total oil stocks fell 8.6 mb but were 30 mb above a year earlier. Japan’s commercial oil stocksfollowed their seasonal trend and dropped 5.3 mb in March but remained very comfortable at177 mb.
The
demand for OPEC crude
oil in 2008 is estimated to have averaged 31.0 mb/d, a decline of 0.4 mb/d from the previous year. In 2009, the demand for OPEC crude is expected to average28.8 mb/d, a decline of 2.2 mb/d from a year earlier.
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