OPEC leaves oil demand growth unchanged

Crude Oil Price Movements
Spot and futures crude oil prices fell for the second straight month in December. Major physical crude benchmarks fell around 9%, Mom, on growing concerns that the rapid spread of the Omicron variant COVID-19 could impact the global economy and demand for crude. oil. OPEC’s benchmark basket fell $5.99, or 7.5%, to a three-month low of $74.38/bbl. Crude oil futures prices extended losses in December, falling on both sides of the Atlantic, with ICE Brent’s first month down $6.05, or 7.5%, to hit a average of $74.80/bbl and NYMEX WTI down $6.96, or 8.8%, to an average of $71.69/bbl As a result, the Brent/WTI futures spread widened expanded by 91¢ to average $3.11/bbl. The market structure of the three crude benchmarks – ICE Brent, NYMEX WTI and DME Oman – weakened in December, mom. Hedge funds and other fund managers extended strong selling in the first half of December, reducing combined net long positions in ICE Brent and NYMEX WTI futures and options by around 30 % between early November and mid-December.

Mondial economy
Global GDP growth forecasts for 2021 and 2022 remain unchanged at 5.5% and 4.2%, respectively. The United States is estimated to grow by 5.5% in 2021, while growth for 2022 is lowered slightly to 4%. Eurozone economic growth for 2021 is revised up to 5.2%, while growth for 2022 remains unchanged at 3.9%. Japan’s economic growth forecast for 2021 is revised down to 1.8%, while growth for 2022 remains unchanged at 2.2%. Growth forecasts in emerging economies remain largely unchanged, with China’s forecast at 8% for 2021 and 5.6% for 2022. India’s forecast for 2021 stands at 8.8% and is forecast at 7% in 2022. Russia’s GDP growth forecast remains unchanged at 4%. for 2021 and 2.7% for 2022. Brazil’s economic growth forecast for 2021 is unchanged at 4.7%, while growth for 2022 has been revised down to 1.5%. The spread of COVID-19 variants and the effectiveness of vaccines, as well as the pace of vaccine deployments around the world, remain key uncertainties. In addition, supply chain bottlenecks and sovereign debt levels in many regions, as well as growing inflationary pressures and central bank responses, remain key factors that require close monitoring.

World oil demand
Global oil demand growth in 2021 is unchanged from last month’s estimate of 5.7mb/d to an average of 96.6mb/d. An upward revision in 4Q21, amid better than expected transport fuel consumption in the OECD, was offset by a downward revision in 3Q21 given the latest actual data. Growth in oil demand in the OECD area is estimated at 2.5 mb/d on average and in the non-OECD region oil demand growth is estimated at 3.1 mb/d for the year . In 2022, the forecast for global oil demand growth also remains unchanged at 4.2 mb/d, with total global consumption at 100.8 mb/d. In the OECD area, oil demand is expected to increase by 1.8 mb/d, while in non-OECD countries, oil demand is expected to increase by 2.3 mb/d. While the impact of the Omicron variant is expected to be mild and short-lived, uncertainties remain regarding new variants and new mobility restrictions, amid an otherwise stable global economic recovery.

world oil supply
Non-OPEC liquids supply growth in 2021 remains unchanged at around 0.7 mb/d, year-on-year, to average 63.6 mb/d. Upward revisions in the United States and Kazakhstan were offset by downward adjustments in Brazil, Canada, Ecuador and Norway. The oil supply estimate for 2021 mainly forecasts growth in Canada, Russia, China, the United States, Guyana, Norway, Argentina and Qatar, while production is expected to have fallen in the Kingdom. United Kingdom, Brazil, Colombia and Indonesia. Similarly, the non-OPEC supply growth forecast for 2022 is also unchanged at around 3.0mb/d, averaging 66.7mb/d. The main drivers of liquids supply growth are expected to be the United States and Russia, followed by Brazil, Canada, Kazakhstan, Norway and Guyana. OPEC NGLs are expected to increase by 0.1 mb/d in 2021 and 2022 to average 5.1 mb/d and 5.3 mb/d respectively. In December, OPEC crude oil production increased by 0.2 mb/d per month, to an average of 27.9 mb/d, according to available secondary sources.

Product markets and refining operations
Refinery margins in all major trading centers rebounded in December after slowing in the previous month. Margins reached their second highest level since May 2020 and approached October 2021 records. An increasingly tight product balance in all regions and accelerating fuel consumption levels, amid the Christmas holidays end of the year, combined to positively drive product markets and ultimately led to a robust performance of jet fuel, kerosene and heating oil, despite a significant increase in global product production levels and an increase in COVID-19 cases . Additionally, strong demand for heating oil, as well as high gas prices, particularly in Europe, further supported middle distillate markets. By contrast, the temporary lockdowns in December exacerbated seasonal gasoline weakness in the Atlantic Basin, limiting further gains in the refining economy.

Tanker market
The long-awaited year-end recovery in dirty tanker spot freight rates failed to materialize in December as year-end shutdowns and weaker Chinese purchases limited tonnage demand. On average, VLCC and Aframax were down 5% and 3% respectively, mom in December. Suezmax managed a 7% gain from the previous month, but remained well below pre-COVID-19 levels. For the year 2021, the average VLCC and Suezmax spot freight rates experienced their worst performance in over a decade. Own fares performed better in December, particularly west of Suez, supported by demand on Mediterranean routes.

Trade in crude and refined products
Preliminary data shows U.S. crude imports fell slightly in the last month of the year, but managed to end up 4% year-on-year in 2021, averaging 6.1 mb/ d. U.S. crude exports remained below 3.0 mb/d in December and averaged 2.9 mb/d in 2021, down 9%. The latest data for China shows that the country’s crude imports recovered from the low level seen in October to average 10.2 mb/d in November as state refiners returned to the market. Preliminary data for December shows crude imports increased further to 10.9mb/d in the last month of the year. This would translate to China’s crude imports in 2021 averaging 10.3mb/d, down about 5% from the inflated levels seen in 2020 when Chinese buyers scooped up excess volumes in the market. . In India, crude imports hit a 10-month high in November to average 4.5mb/d as refiners sought to replenish inventories in anticipation of higher cycles in 1Q22 following winter holidays. October and early November. India’s product exports remained stable, averaging 1.3mb/d in November, as diesel outflows remained strong and jet fuel exports increased, reflecting a tighter Asian market due to limited exports from China. Japan’s crude imports surged in November to their highest level since March 2020, averaging 2.8mb/d, amid increased refining cycles to meet winter heating demand . The latest data shows crude imports to OECD Europe fell in September, although tanker tracking data shows inflows rising through November and then falling in December as part of the lockdown measures. locking.

Movements of commercial stocks
Preliminary data for November indicates that total OECD commercial oil stocks fell by 16.0mb, mum. At 2,721 mb, OECD commercial oil stocks were 389 mb lower than the same period in 2020, 247 mb lower than the last five-year average and 221 mb lower than the 2015-2019 average. Within components, crude and product inventories fell, mom, by 12.7mb and 3.3mb, respectively. At 1,317mb, OECD crude inventories were 143mb below the last five-year average and 137mb below the 2015-2019 average. Stocks of OECD products stood at 1,405 mb, a deficit of 104 mb compared to the last five-year average and 84 mb below the 2015-2019 average. In terms of days of futures coverage, OECD trading stocks fell, mom, in November by 0.2 days to 60.7 days. This is 13.2 days less than November 2020 levels, 3.6 days less than the last five-year average and 1.5 days less than the 2015-2019 average.

Balance of supply and demand
OPEC crude demand in 2021 remains unchanged from the previous month at 27.8 mb/d, about 4.9 mb/d higher than in 2020. OPEC in 2022 also remains unchanged from the previous month at 28.9 mb/d, about 1.0 mb/d higher than in 2021.
Source: OPEC

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Felix J. Dixon