Oil Market Report - May 2017

Highlights

Demand

• Global Demand Growth: Despite weakness in previously solid countries like India, the US, Germany, and Turkey, which curtailed the 1H17 global demand growth estimate by 115 kb/d, global demand growth is still forecasted at 1.3 mb/d for 2017. Total demand is expected to be at 97.9 mb/d.
• OECD Stocks: OECD commercial stocks decreased for a second consecutive month in March, by 32.9 million barrels (1.1 mb/d), to 3,025 million barrels. This decrease is attributed to lower refinery output and increased exports.

Supply

• Global Oil Supply: Global oil supply fell by 140 kb/d in April, primarily due to reduced pumping in Canada. Non-OPEC supply is set to increase by 600 kb/d in 2017.
• OPEC Production: OPEC crude production rose by 65 kb/d in April to 31.78 million barrels per day (mb/d). Higher output from Nigeria and Saudi Arabia offset lower flows from Libya and Iran. Year-to-date compliance with production cuts remained robust at 96%.

Refining

• Refining Activity: Global refining activity is expected to slow down seasonally in the second quarter (2Q17), decreasing by 370 kb/d from the first quarter (1Q17). However, it is set to ramp up by 2.4 mb/d by July-August. The OECD leads this trend, while non-OECD areas face challenges such as maintenance and refinery closures in the Middle East, underperformance in Latin America, and flat growth in India.

Prices

• Benchmark Oil Prices: Benchmark oil prices fell after April 11 and traded close to their late-November levels before the OPEC output deal. They rose on May 15 after indications of support for extending the production cuts from Russia and Saudi Arabia. Sour grades continued to trade higher than sweet crudes.

Stocks

• Recent OECD Industry Stock Changes: Recent OECD industry stock changes show a decrease in March, with further revisions to preliminary data. Specific regions like OECD Americas, Europe, and Asia Oceania have seen various changes in their stock positions.

Refining

• Global Refining: Global refining activities are expected to increase by 2.4 mb/d by July-August, driven by the OECD. Non-OECD regions face challenges such as maintenance and refinery closures in the Middle East, underperformance in Latin America, and flat growth in India. Growth in China and Russia may partially offset these issues.