Oil Market Highlights

The OPEC Reference Basket dropped for the second-consecutive month in April, declining by $5.39 or more than 5% to stand at $101.05/b. Year-to-date, the Basket declined by $10.22 or 8.7% from the same period last year. Crude oil futures took a substantial hit again in April, with Brent falling 5.6% to July 2012 levels with a monthly average of around $103/b. Nymex WTI edged 1% lower to average $92/b. A vulnerable global economy combined with the prospect of moderate demand growth, rising crude production, and high stocks sent prices tumbling. Crude oil also lost ground amid cross-commodity and equity market herd behavior as momentum trading led to a selloff that sent commodities, such as gold and silver, plunging by record levels. The latest CFTC and ICE commitment of traders’ reports confirmed the bearish investor sentiment towards oil in April.

However, the Basket has shown some improvement since the start of the month to stand at $101.67/b on 9 May.

World economic growth: is forecast at 3.2% in 2013, following growth of 3.0% in the previous year, unchanged from the last report. The US housing and labour markets continue to show a recovery, but given persistent fiscal uncertainties, the US growth forecast for 2013 remains unchanged at 1.8%. Japan’s forecast has been revised to 1.1% from 0.8%, on support from recent monetary stimulus. The Euro-zone’s forecast remains unchanged, with an expected contraction of 0.5%. Slowing exports have impacted China’s economy and growth has been revised to 8.0% from 8.1%, while India’s forecast is unchanged at 6.0%. A fragile recovery in the global economy has been visible since the beginning of the year, but momentum has started slowing again and growth risks are skewed to the downside

World oil demand: growth in 2013 remains unchanged from the previous report at 0.8 mb/d, broadly in line with the estimate for 2012. However, the performance of the first quarter of this year has been revised down based on actual data. A large portion of the growth is seen coming from China, with a 0.4 mb/d increase. The other non-OECD countries are expected to add some 0.8 mb/d, with the Middle East region accounting for around 0.3 mb/d, followed by Other Asia and Latin America with growth of about 0.2 mb/d each. In contrast, OECD demand is expected to see a contraction of around 0.4 mb/d, which is slightly less than in 2012.

Non-OPEC: supply is forecast to grow by 1.0 mb/d in 2013, following an increase of 0.5 mb/d in 2012, broadly unchanged from the previous report. OECD Americas remain the driver of growth in 2013, while OECD Europe is seen experiencing the largest decline. OPEC NGLs and nonconventional oils are expected to increase by 0.2 mb/d in 2013. In April, total OPEC crude oil production, according to secondary sources, was estimated to average 30.46 mb/d, an increase of 0.28 mb/d over the previous month.

Demand for OPEC crude: in 2012 is estimated at 30.2 mb/d, following an upward revision of 0.1 mb/d from the previous report and broadly unchanged compared to the previous year. In 2013, demand for OPEC crude is expected to average 29.8 mb/d, representing an upward revision of 0.1 mb/d from the previous report and a 0.4 mb/d decline from last year.