Oil Market Report - April 2018

Highlights

Mission accomplished?

• Global Oil Demand Growth: The forecast for 2018 remains unchanged at 1.5 million barrels per day (mb/d).
• OECD Demand: Revised upward by 315 kilobars per day (kb/d) in Q1 2018, primarily due to cold weather in the US and the start-up of a petrochemical project. However, there are offsetting reductions in Q2 and Q3.
• Non-OECD Demand: Revised downward by 260 kb/d in Q1 2018 due to weak Chinese data. India's early 2018 growth is robust at 380 kb/d year-over-year (y-o-y) in the first two months.

Supply

• Global Oil Supply: Eased by 120 kb/d in March to 97.8 million barrels per day (mb/d), following deeper cuts by OPEC and non-OPEC producers to 2.4 mb/d. Despite this, supply is 1.4 mb/d higher than a year ago, largely due to increased US production.
• OPEC Crude Production: Fell by 200 kb/d in March to 31.83 mb/d, with further declines in Venezuela and lower output in Africa. Compliance with the output deal reached 163%, and the call on OPEC crude and stocks will remain around 32.5 mb/d for the rest of the year.
• Non-OECD Supply: Set to grow by 1.8 mb/d in 2018.

Stocks

• OECD Commercial Stocks: Declined by 26 million barrels (mb) to 2,841 mb and were just 30 mb above the five-year average at the end of February. The average could be reached by May, assuming tight balances in Q2 2018.
• Product Stocks: Already in deficit.

Prices

• ICE Brent Futures: Averaged $66.72/barrel (bbl) in March and have risen above $70/bbl in recent days, levels not seen since December 2014. Factors include tension in the Middle East and improved compliance with the OPEC/non-OPEC output deal.
• Refinery Maintenance: After peaks in Europe and the US in Q1 2018, global throughput will see a seasonal ramp-up in Q2 2018. Runs will increase by 3.1 mb/d from March to July, but supply of refined products will lag behind demand growth.

Summary

The report highlights the stable forecast for global oil demand growth at 1.5 mb/d for 2018, with revisions in both OECD and non-OECD regions. Supply has eased slightly, with OPEC and non-OECON producers cutting production. Stock levels are close to the five-year average, and prices are rising due to geopolitical tensions and improved compliance with the OPEC/non-OPEC deal. Refineries are expected to experience a seasonal increase in throughput, but refined product supply may lag behind demand growth.