OPEC: world oil demand revised upwards
Crude Oil Price Movements Crude oil spot prices rebounded in January from the previous month as oil futures markets soared. Crude prices were supported by strong global oil market fundamentals amid dissipating fears over the impact of the COVID-19 Omicron variant and geopolitical risks, which raised oil supply concerns. short-term oil. OPEC’s benchmark basket rose $11.03, or 14.8%, to $85.41/bbl in January, its highest monthly value since September 2014. Crude oil futures rose on both sides of the Atlantic with ICE Brent’s first month up $10.77, or 14.4%, in January to average $85.57/bbl and NYMEX WTI up $11.29, or 15.7%, for an average of $82.98/bbl. As a result, the Brent/WTI futures spread narrowed by 52¢ to an average of $2.59/bbl. The market structure of the three crude benchmarks – ICE Brent, NYMEX WTI and DME Oman – strengthened significantly in January compared to the previous month, as market perception of the outlook for the supply and demand balance s being improved. Hedge funds and other fund managers turned more positive on oil prices, increasing net long positions to their highest level since last November.
Global economy 4Q21 results were released for the major economies, with particularly better than expected growth levels in the United States and China. As a result, the global GDP growth estimate for 2021 is revised to 5.6% from 5.5% in the previous assessment. Global growth for 2022, however, remains unchanged at 4.2%. US GDP was reported at 5.7% for 2021, while growth forecasts for 2022 remain unchanged at 4%. Eurozone economic growth for 2021 and 2022 remains at 5.2% and 3.9%, respectively. Japan’s economic growth forecast for 2021 and 2022 is unchanged at 1.8% for 2021 and 2.2% for 2022. China’s growth in 2021 was reported at 8.1% and the forecast for 2022 remains at 5.6%. India’s forecast for 2021 is unchanged at 8.8%, while the forecast for 2022 has been revised upwards to 7.2% from 7% previously, taking into account the acceleration in growth levels in the 2H21 and an expected postponement to 1H22. Russia’s GDP growth forecast remains at 4% for 2021 and 2.7% for 2022. Brazil’s economic growth forecast for 2021 is unchanged at 4.7% and remains at 1.5% for 2022. Key uncertainties remain the spread of COVID-19 variants and vaccine effectiveness, as well as the pace of vaccine deployments around the world. In addition, supply chain bottlenecks and sovereign debt levels in many regions, as well as growing inflationary pressures and central bank responses, also require close monitoring.
World oil demand
Global oil demand growth in 2021 is revised slightly upwards by 17 tb/d, reflecting the latest data trends in the regions, to now stand at 5.7 mb/d. The 3Q21 and 4Q21 figures for the OECD Americas are revised upwards, mainly due to the better performance in the United States, confirming the upward revisions made last month. Overall, non-OECD growth in 2021 increased by 3.1 mb/d while the OECD recorded growth of 2.6 mb/d. Within the OECD, the United States continued to be the main driver of oil demand, recording growth of 1.6 mb/d. In 2022, oil demand growth is forecast at 4.2 mb/d, unchanged from last month, with OECD and non-OECD countries expected to grow by 1.8 mb/d and 2, respectively. 3 mb/d. In the OECD, optimism stems from economic growth, with the favorable effects of fiscal and monetary policies expected to more than offset the negative effects of Omicron on oil demand. Industrial activities are also expected to pick up, which will boost demand for diesel. Meanwhile, mobility has picked up considerably, with domestic, regional and international flights already showing signs of recovery.
world oil supply
Non-OPEC liquids supply growth in 2021 is revised down from 0.06 mb/d to around 0.6 mb/d year-on-year, to an average of 63.6 mb/d. An upward revision, mainly in the United States, was offset by downward revisions to supply forecasts from other countries such as Brazil, China, Canada, Ecuador and the United Kingdom in due to an unexpected drop in production in 4Q21. The oil supply forecast for 2021 mainly foresees growth in Canada, Russia, the United States, China, Guyana, Argentina, Qatar and Norway, while production is expected to decline in the United Kingdom, in Brazil, Colombia and Indonesia. For 2022, non-OPEC supply growth remained unchanged at 3.0 mb/d year-on-year, to average 66.6 mb/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 January, OPEC crude oil production increased by 0.06 mb/d per month, to an average of 27.98 mb/d, according to available secondary sources.
Product markets and refining operations
Refinery margins on the U.S. Gulf Coast versus WTI and Singapore versus Oman posted strong performances in January, gaining $1.42 billion and 50¢/bbl respectively, month-on-month, as Global commodity inventory levels hit multi-year lows. However, in Europe, refinery margins lost $1.20/bbl compared to Brent, as they were affected not only by higher crude prices, but also by record natural gas prices, as nearly 80% of all European refineries depend on natural gas to power their plants. Across all regions, diesel fuel contributed the most to margin as inventories of this product continued to decline, resulting in a higher premium over crude oil. At the same time, preliminary data shows that global refineries rose only slightly, limited by a winter storm that affected operations in parts of the United States, hampering a higher recovery in total refinery inputs.
After a year that saw multi-decade lows, dirty tanker spot freight rates began 2022 near the lower end of the five-year range, even as rising bunker fuel prices weighed on profits. VLCC rates, in particular, continued to languish in the doldrums while Suezmax and Aframax rates declined after an improved performance at the end of last year. Clean point freight rates also saw a similar decline from a slight increase seen at the end of 2021 due to heating demand and weather-related delays that reduced tanker availability.
Trade in crude and refined products
Preliminary data shows US crude imports rose 3% month-on-month in January to average 6.5mb/d, the highest since June 2021. US crude exports fell to the lowest since December 2018, with an average of 2.4 mb/d in January. Imports and exports of U.S. goods fell to the lowest since May 2020, the month hardest hit by the pandemic. Meanwhile, the latest data for China shows the country’s crude imports continued to recover from lows seen in October to hit a nine-month high of 10.9mb/d in December. China’s commodity exports contracted 24%, mum, in December, the lowest since January 2017, amid government directives to limit the outflow of clean produce. India’s crude imports averaged 4.6mb/d in December, the highest of the year, as refiners eyed higher volumes in 1Q22. India’s commodity exports reached levels last seen in April 2020, with increases for all major commodities except jet fuel, which remained at the still high level seen in the previous month. Japan’s crude imports have seen a 26% increase over the past two months to average 3.0 mb/d, the highest since December 2019, amid increased refining runs to meet winter demand and increased use of crude for direct combustion.
Movements of commercial stocks
Preliminary data from December shows that total OECD commercial oil stocks fell by 31.2mb month-on-month. At 2,725 mb, inventories were 311 mb lower than the same period a year earlier, 210 mb lower than the last five-year average and 202 mb lower than the 2015-2019 average. Within components, crude and product inventories fell 18.3 mb and 12.9 mb respectively. At 1,330 mb, crude stocks in the OECD were 99 mb below the last five-year average and 100 mb below the 2015-2019 average. Stocks of OECD products stood at 1,395 mb, a deficit of 111 mb compared to the last five-year average and 102 mb below the 2015-2019 average. In days of futures coverage, December commercial stocks in the OECD rose 0.1 days month-on-month to 61.1 days. This represents 10.6 days less than December 2020 levels, 2.9 days less than the last five-year average and 1.3 days less than the 2015-2019 average.
Balance of supply and demand
OPEC crude demand in 2021 is revised up by 0.1 mb/d from last month’s estimate to 27.9 mb/d, or about 5.0 mb/d. d more than in 2020. OPEC crude demand in 2022 was also revised up by 0.1 mb/d from last month’s report to 28.9 mb/d, or about 1.0 mb/d more than in 2021.