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The OPEC monthly oil market report

Hydrocarbon Engineering,

Highlights from the OPEC monthly oil report:

Crude oil price movements

The OPEC Reference Basket rose US$0.19 to average US$45.02/bbl in October, for the third month in a row. Crude oil futures increased at a faster pace with ICE Brent increasing US$0.75 to US$49.29/bbl and Nymex WTI gaining US$0.82 to stand at US$46.29/bbl. Speculator net length declined as short positions increased. The Brent-WTI spread narrowed to average close to US$3/bbl in October.

World economic growth remains modest at 3.1% in 2015, mainly due to a continued slowdown in emerging and developing economies, as well as low US growth in the third quarter, and global economic growth is expected to improve to 3.4% in 2016. US growth has been revised to 2.4% in 2015 and 2.5% in 2016, while total OECD growth remains at 2.0% for 2015 and 2.1% for 2016. Figures for China and India remain unchanged at 6.8% and 6.4%, and 7.4% and 7.6%, respectively.

World oil demand is expected to grow by 1.50 million bpd in 2015 to average 92.86 million bpd, unchanged from the previous report. In 2016, world oil demand growth is seen reaching 1.25 million bpd, in line with the previous month’s assessment, to average 94.14 million bpd.

Non-OPEC oil supply is estimated to average 57.24 million bpd in 2015, an increase of 0.72 million bpd, unchanged from the previous month’s estimation. The forecast for 2016 non-OPEC oil supply remained unchanged, showing a contraction of 0.13 million bpd to average 57.11 million bpd. OPEC NGLs in 2016 are forecast to increase by 0.17 million bpd to average 6.18 million bpd. In October, OPEC production according to secondary sources dropped by 256 000 bpd to average 31.38 million bpd.

Product markets and refining operations

Despite the peak maintenance season seen in October with more than 8 million bpd of capacity offline worldwide, refinery margins fell across the globe due to high inventories and expectations of a mild winter. Product markets in the Atlantic Basin continued to weaken even with the US gasoline demand, pressured by oversupply. Asian margins lost some momentum amid a narrowing of gasoline and gasoil crack spreads, which outweighed the positive performance of naphtha and fuel oil.

A general improved sentiment was seen in the dirty tanker market, on the back of strong tonnage demand and delays seen in several ports. On average, spot freight rates rose by 19% over the previous month. Clean tanker freight rates declined both East and West of Suez as clean tanker demand was limited. OPEC sailings and fixtures were higher than the month before, while sailings declined in all reported regions, except in European ports.

OECD commercial oil stocks remained almost unchanged in September to stand at 2942 million bbls. At this level, inventories were around 210 million bbls higher than the latest five year average, with crude and products indicating surpluses of around 170 million bbls and 40 million bbls respectively. In terms of days of forward cover, OECD commercial stocks stood at 63.0 days in September, around 4.5 days above the five year average.

Balance of supply and demand

Estimated demand for OPEC crude in 2015 remained at 29.6 million bpd, which is an increase of 0.6 million bpd over the previous year. In 2016, demand for OPEC crude is forecast at 30.8 million bpd, around 1.2 million bpd higher than in the current year and unchanged from the previous OPEC report.

Adapted from report by Francesca Brindle

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