Monthly Oil Market Report
Oil Market Highlights
OPEC Reference Basket
increased for the sixth month in a row to average almost $110/b inMarch, up $9.55/b from the previous month. That was the highest monthly level since the onset ofthe financial crisis. The crisis in Libya and fears that supply disruptions might spread to othercountries in the MENA region lifted the fear premium, pushing futures prices higher. This wassomewhat capped by market uncertainty following the tragic events in Japan. The Nymex WTIfront-month rose to average almost $103/b despite a continued build in US crude oil inventories andICE Brent averaged $114.67/b. The Basket moved higher in April to reach $120.30/b on 11 April.
is expected to grow by 3.9% in 2011. This represents a downward revision of0.1% from the previous report due to the impact of the tragic events in Japan, which is now forecastto decline by 0.1%, compared to growth of 1.5% in the previous report. The uncertainty for theforecast is high as the final economic consequences and the details of governmentalcountermeasures are not yet known. The recovery in the rest of the world seems to continue. Whilesecond round effects from Japan have not been incorporated due to the lack of visibility, forecastsfor other economies remain unchanged from the previous report. Risks seem skewed to thedownside with additional challenges coming from the continued sovereign debt crisis in theEuro-zone, increasing inflation across the globe and a potential overheating in developing Asia.
World oil demand
is forecast to grow by 1.4 mb/d in 2011, following an increase of 2.0 mb/d in theprevious year. Japan’s disaster led to a sudden decline in the country’s use of oil. However, thisshould be offset by fuel substitution from nuclear to crude-burning and rebuilding operations later inthe year. With the start of the second quarter, world oil demand has eased according to the seasonalnorm. Risks to the forecast remain, particularly from higher oil prices which are likely to have aslightly negative impact on transport fuel demand worldwide. Early signs indicated winter productuse was more than anticipated in the fourth quarter of last year, which led to an upward revision tothe 2010 forecast.
Non-OPEC oil supply
is expected to increase by 0.6 mb/d in 2011, an upward revision of0.1 mb/d from the previous month. The adjustment was supported mainly by healthy productionduring the first few months of the year. Anticipated growth continues to be driven by Brazil, US,Canada, Colombia and China, partially offset by declines in Norway, and UK. OPEC natural gasliquids (NGLs) and non-conventional oils are forecast to increase by 0.5 mb/d in 2011 toaverage 5.2 mb/d. According to preliminary data, total OPEC crude production in Marchaveraged 29.31 mb/d, a decline of 627 tb/d from the previous month.
have been affected by the tragic events in Japan, which has had a bearish impacton the top of the barrel as almost 25% of Japan’s ethylene production capacity is offline. In contrast,middle distillates and low sulphur fuel oil have seen support from stringent Japanese productspecifications as well as strong US demand. Expectations of stronger diesel demand could lendsome support to refinery margins in the coming months, offsetting weakness at the top of the barrel.
OPEC spot fixtures increased in March by 4.3 mb/d to average 15.4 mb/d. Sailings from OPECdeclined in March by 0.5 mb/d. The
for crude oil showed positive momentum withspot freight rates increasing on most reported routes in March. Higher activities, risk premiums andhigher bunker fuel prices all supported freight rates in March. In the clean market, freight ratesincreased on most reported routes due to higher tonnage demand.
fell around 9 mb in March. This draw was driven by products which fellstrongly by 18.3 mb, while crude stocks offset some of the decline, increasing by 9.3 mb. However,US commercial oil inventories still remain 24 mb above the historical average. The most recent datafor February shows that commercial oil inventories in Japan declined by 8.3 mb, with crude andproducts showing a draw of 6.5 mb and 1.8 mb respectively. Japanese oil inventories remained at3.4% above a year ago, while the deficit with historical trend stood at 6.2%
demand for OPEC crude
in 2010 is estimated at 29.5 mb/d, around 0.2 mb/d higher than inthe previous report. With this adjustment, the demand for OPEC crude stood at about 0.4 mb/dhigher than the year before. In 2011, demand from OPEC crude is expected to average 29.9 mb/d,about 0.4 mb/d higher than a year ago and 0.1 mb/d over the previous assessment.