Oil Market Report - October 2019
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In September, oil markets largely recovered from a significant supply disruption caused by attacks on Saudi Arabia's oil facilities, which briefly shut down over half of the country's production capacity (5.7 mb/d). Despite the initial spike in Brent prices to $71/bbl, the market quickly stabilized, and prices are currently $2/bbl below the pre-attack level at $58/bbl. The quick restoration of operations by Saudi Aramco and the reestablishment of customer confidence played a crucial role in this recovery.
The market remains cautious due to the potential for future attacks, but current security concerns have been overshadowed by weaker demand growth and upcoming new oil production. For both 2019 and 2020, the headline oil demand growth forecasts have been reduced by 0.1 mb/d, primarily reflecting a technical adjustment based on updated U.S. demand data for 2018.
Demand
Overview: Global oil demand recovered from earlier lows, rising by 0.8 mb/d year-on-year in July and 1.4 mb/d in August. Growth is expected to accelerate to 1.6 mb/d in the second half of 2019, driven by a lower base in 2018 and current oil prices, which are 30% lower year-over-year.
Fundamentals: For 2019, the demand growth forecasts have been reduced by 0.1 mb/d to 1 mb/d, reflecting changes in 2018 data. For 2020, the reduction reflects a lower GDP outlook.
OECD
OECD industry stocks increased by 20.8 mb in August to 2,974 mb, standing 43.1 mb above the five-year average. Stocks in terms of days of forward demand rose by 0.6 days to 61.6 days, which is 0.6 days below the average. Preliminary data for September showed stocks falling in all three OECD regions and by 21.7 mb overall. Floating storage of crude oil rose by 1.8 mb in September to 70.1 mb. The number of Iranian vessels used for storage remained unchanged from the previous month.
Supply
Overview: Global oil supply plunged 1.5 mb/d in September to 99.3 mb/d due to the attacks on Saudi oil facilities. With a swift recovery and steady supply from the rest of OPEC, stock draws are likely in the fourth quarter of 2019. In 2020, non-OPEC supply growth is expected to accelerate from 1.8 mb/d to 2.2 mb/d, driven by the United States, Brazil, and Norway. This reduces the call on OPEC to 29 mb/d.
OPEC Crude Oil Supply: OPEC's supply remained stable despite the attacks, with a rapid recovery and steady output.
Non-OPEC Supply: Non-OPEC supply is projected to grow significantly in 2020, with notable contributions from the United States, Brazil, and Norway.
Refining
Overview: Global refining throughput declined by 0.5 mb/d year-on-year in the third quarter of 2019, marking the lowest growth in ten years. This is attributed to a counter-seasonal draw in demand after five consecutive quarters of minimal growth. For 2020, refining throughput is expected to increase by 1.2 mb/d.
Margins: Refinery margins remain under pressure, with the OECD experiencing a slight decline.
OECD Refinery Throughput: OECD refinery throughput decreased by 0.5 mb/d year-on-year in Q3 2019, reaching the lowest growth in a decade. Non-OECD refinery throughput is expected to rise by 1.2 mb/d in 2020.
Stocks
Overview: OECD industry stocks increased by 20.8 mb in August to 2,974 mb, standing 43.1 mb above the five-year average. Stocks in terms of days of forward demand rose by 0.6 days to 61.6 days, which is 0.6 days below the average. Preliminary data for September showed stocks falling in all three OECD regions and by 21.7 mb overall. Floating storage of crude oil rose by 1.8 mb in September to 70.1 mb. The number of Iranian vessels used for storage remained unchanged from the previous month.
Prices
Overview: On the first trading day after the attacks (September 16), ICE Brent futures rose by 19% to $71.95/bbl. Following reassurances from Saudi Arabia that normal operations would resume, prices quickly eased and are currently around
