Oil Market Report - June 2018

Highlights

• Demand Growth:

  • 2018: Demand growth estimate remains at 1.4 mb/d, with recent data showing strong growth in Q1 and early Q2, partly due to colder weather in the northern hemisphere. A slowdown is expected in the second half of 2018.
  • 2019: First estimate anticipates demand growth of 1.4 mb/d, driven by a solid economic background and stable prices. Risks include potentially higher prices and trade disruptions.

• Supply:

  • Global Supply: Global oil supply increased by 276 kb/d in May, reaching 98.7 mb/d, with non-OPEC supply growing by 2.2 mb/d compared to a year ago. OPEC production increased slightly.
  • OPEC: OPEC crude supply rose by 50 kb/d in May to 31.69 mb/d, with higher flows from Saudi Arabia, Iraq, and Algeria offsetting falls in Nigeria and Venezuela.
  • Non-OECD: Non-OPEC supply is expected to grow by 2.0 mb/d in 2018, easing to 1.7 mb/d in 2019.

• Stocks:

  • OECD Commercial Stocks: Declined by 3.1 mb in April to a new three-year low of 2,809 mb. Middle distillate holdings fell by 7.4 mb in April and were significantly below the five-year average in the Americas and Europe ahead of the peak demand season.

• Prices:

  • Benchmark Crude Prices: Reached multi-year highs in late May but have since fallen back, awaiting the outcome of the OPEC meeting.
  • Futures Prices: ICE Brent and NYMEX WTI futures prices are up 14% and 9%, respectively, this year.

• Refining:

  • Refinery Runs: Revised down to 80.9 mb/d for Q218 but revised higher to 82.5 mb/d for Q318.
  • Refined Products Stocks: Expected to build in Q318 by 0.4 mb/d after drawing by 1.2 mb/d in Q218.
  • Margins: Despite Brent prices briefly touching $80/bbl, margins were generally higher month-over-month (m-o-m).

Summary

The report highlights that while demand growth estimates remain steady, supply has seen significant increases, particularly from non-OPEC countries. Stock levels are concerning, especially in the OECD region, where inventories have dropped to their lowest levels in three years. Price trends indicate volatility, with benchmark crude prices experiencing a temporary spike followed by a decline. Refining margins have improved despite fluctuating crude prices.