OPEC Monthly Oil Market Report: May


Growth in in global GDP is forecasted in the latest OPEC monthly report, plus a positive momentum in world oil demand is taking place in the OECD. South Africa saw demonstrated improvements in output, new orders and employment.

OPEC’s latest monthly Oil Market Report Published on April 12 2018 forecasts growth in global GDP as well as a positive momentum in world oil demand taking place in the OECD, with total world oil demand for the year forecasted to average 98.70 mb/d. Additionally, non-OPEC supply reflecting growth year on year.
 

Oil Market Highlights


In March, the OPEC Reference Basket (ORB) increased by less than 0.5% to $63.76/b. Following US equity market movements and robust oil demand growth forecasts, tightening US crude stocks and geopolitical tensions, Oil futures ended about 1% higher. ICE Brent was 99¢, or 1.5% higher at $66.72/b from the previous month. The Global GDP growth forecast remains at 3.8% for 2017 and 2018.  Expected US growth in 2018 remains the same as March at 2.7%. Growth in the Euro-zone was revised up to 2.3% in 2018. Japan, India and China’s 2018 GDP growth forecasts remain unchanged. 


Total world oil demand is now pegged at 97.07 mb/d for the year. World oil demand growth in 2018 was revised higher by 30 tb/d, compared to last month’s report, to now stand at 1.63mb/d.  There is a positive momentum taking place in the OECD in the 1Q18 due to better-than-expected data, supported by development in industrial activities, colder-than-anticipated weather and strong mining activities in the OECD Americas and the OECD Asia Pacific. Total world oil demand for the year is forecast to average 98.70 mb/d.


For 2018, non-OPEC supply was also revised up by 0.08 mb/d from the previous month’s assessment now reflecting growth of 1.71 mb/d year on year. This is supported by higher-than-expected output in 1Q18, mainly in the FSU and the US.  In March, OPEC crude production decreased by 201 tb/d to average 31.96 mb/d, according to secondary sources. Product markets in the Atlantic Basic exhibited strong gains during March strengthening sharply. In Europe, product markets also strengthened, supported by higher middle distillate demand and tighter middle distillate inventories. 

Average dirty tanker spot freight rates were flat in March. Dirty tanker rates were depressed for all classes despite some relative gains for Suezmax from a month earlier. Preliminary data for February shows that total OECD commercial oil stocks fell by 17.4mb to stand at 2854 mb, which is 43 mb above the latest five year average.
 

Crude Oil Price Movements


OPEC Reference Basket
The ORB ended almost unchanged, increasing by just 0.4% in a month of typically lower demand for physical oil due to higher refinery. The light sweet crude ORB components from West and North African, Saharan Blend, Es Sider, Girassol, Bonny Light, Equatorial Guinea’s Zafiro and Gabon’s Rabi values increased on average by 75¢, 1.1% to $66.06/b. On 11 April, the ORB stood at $68.29/b, $4.53 above the March average.
 

Africa


In South Africa, the trade balance was in surplus in February. With a low surplus of only 0.4 billion rand, this demonstrates a shift from January’s sizable trade deficit of more than 27 billion rand. There was also gradual continued improvement in domestic business conditions as reflected in the country’s private sector index. The Standard Bank South Africa PMI posted 51.1 in March, compared to 51.4 in February. The survey also demonstrated improvements in output, new orders and employment. 

In Egypt, the pound appreciated by 0.2% month on month versus the US dollar in March. The survey showed that input-price inflation slowed in March to a 30-month low.

The OPEC Monthly Oil market report also forecast positive growth for world oil demand and world oil supply. 
 

World Oil Demand


For the year, total world oil demand is now at 97.07 mb. World oil demand growth for 2018 was adjusted higher by around 30 tb/d compared to previous month’s assessment with oil demand growth now set at 1.63 mb/d. Additionally, total oil consumption is now at 98.70 mb/d with total world oil demand breaking a historical threshold of 100 mb/d in 4Q18.

For 2017, world oil demand grew by 1.65 mb/d, increasing by 0.03 from the previous month’s assessment. In Africa, there was a 0.11 growth from 2016 – 2017. In comparison with 2018, in Africa, there is a 0.14 growth from 2017 – 2018.
 

World Oil Supply


“World oil supply in March 2018 increased by 0.18 mb/d m-o-m to average 98.15 mb/d, representing an increase of 2.15 mb/d y-o-y.” OPEC cruid oil production in March 2018 decreased by 201 tb/d to average 31.96 mb/d.

Non-OPEC supply in 2018 is forecasted to increase by 1.71 mb/d compared with growth of 0.90 mb/d in 2017. Non-OPEC supply for 2018 was revised up by 0.08 mb/d in absolute terms and is now expected to growth at a faster rate. They key drivers for growth in 2018 are the US, Canada, Brazil, the UK, Kazakhstan, Ghana (0.05 mb/d) and Congo (0.04 mb/d). Upward revisions were also seen in Trinidad and Tobago.

In Africa, non-OPEC oil supply in from 2017-2018 is forecasted with 0.05% growth from 1.86 in 2017 – 1.91 in 2018.
 

European Market


In March, the gasoline market in Europe lost ground from lower export opportunities to West Africa, the Middle East and the US. Refinery crude throughput, mb/d – In Africa, 1Q18 is estimated to be 2.05 mb/d.
 

Dirty tanker freight rates

 

VLCC freight rates in March remained weak, with daily earning declining on most major trading routes. VLCC spot freight rates for tankers trading on West Africa to East routes fell by 3% m-o-m to stand at WS41 points in March. 
 

Suezmax

 

Suezmax was the only class in the dirty sector that showed positive earning in March, although the gains were relatively minor. Suezmax average freight rates went up by WS7 points, or 16% to stand at WS54 points in March. Average rates saw improvements in West Africa and the Caribbean as both markets were activities allowing freight rates to increase.

In West Africa, healthy tonnage demand supported freight rates in March. On average, spot freight rates for tankers operating on the West Africa-to-USGC route increased by WS6 points to average WS57 point in March. 
 

Summary


As statistics and research suggests, the Global GDP growth forecast remains at 3.8% for 2017 and 2018.  Expected US growth in 2018 remains the same as March at 2.7%. Growth in the Euro-zone was revised up to 2.3% in 2018 whilst Japan, India and China’s 2018 GDP growth forecasts remain unchanged. In Europe, product markets have also strengthened due to support from higher middle distillate demand and tighter middle distillate inventories. In Africa, non-OPEC oil supply in from 2017-2018 is forecasted with 0.05% growth from 1.86 in 2017 – 1.91 in 2018. In South Africa, there has also been a graduate improvement in domestic business conditions which has been seen in the country’s private sector index, as well as a survey demonstrating improvements in output, new orders and employment in South Africa.
 
Back

Africa Oil Week Newsletter

Stay connected with our global oil, gas and energy community.
Register for AOW news.