Crude Oil Market

The International Energy Agency (IEA) released its monthly oil report this morning. As expected and as the EIA did, they lowered their forecast for oil demand growth versus last month’s report. They lowered their forecast for 2012 oil demand growth by 200,000 bpd compared to the November report. Following are the main highlights from the report. OPEC will also be releasing its report today one day ahead of the OPEC meeting.

Crude futures prices moved higher in November and early-December on seasonal demand strength and tight supply. Bullish impetus also came from news of a potential EU ban on Iranian crude imports. These factors outweighed escalating economic risks, but resulted in uneven price gains among the key benchmarks. At writing, Brent stood near $107/bbl, with WTI around $98/bbl.

  • A more precarious economic backdrop and weaker 4Q11 data – particularly for OECD Europe – curb oil demand projections for 2011 and 2012 by around 0.2 mb/d. Global oil demand is expected to average 89.0 mb/d by 2011, a rise of 0.7 mb/d on 2010, before gaining a further 1.3 mb/d in 2012 to reach 90.3 mb/d.
  • Global oil supply rose by 0.9 mb/d to 90.0 mb/d in November from October, driven by lower non-OPEC supply outages. A yearly comparison shows similar growth, with OPEC supplies standing well above year-ago levels. Non-OPEC supply growth averages 0.1 mb/d for 2011 but rebounds to 1.0 mb/d in 2012, with strong gains expected from the Americas.
  • OPEC crude oil supply in November rose to the highest level in more than three years, up by 620 kb/d to 30.68 mb/d, with Saudi Arabia and Libya accounting for 80% of the increase. OPEC ministers will meet on 14 December in Vienna to review the market outlook. The ‘call on OPEC crude and stock change’ for 2012 stands at 30.2 mb/d, near recent OPEC output levels.
  • Global refinery crude throughputs fell by close to 1 mb/d in October, as OECD autumn maintenance hit its seasonal peak and Chinese runs remained weak. Preliminary data show runs rebounding sharply in November, despite poor margins, to meet higher winter demand. 4Q11 estimates are largely unchanged at 75.1 mb/d, rising to 75.8 mb/d in 1Q12.
  • OECD industry oil stocks declined in October by a steep 36.3 mb to 2 630 mb, or 57.2 days of forward cover. The inventory deficit versus the five-year average widened to 61.9 mb, from 40.0 mb in September, and crude and middle distillates dominated the October decline. November preliminary data show a counter-seasonal, 6.9 mb build in OECD industry stocks.
  • Updated medium-term projections show global oil demand rising from 88.3 mb/d in 2010 to 95.0 mb/d in 2016, growth of 1.1 mb/d per year on average. A stronger global liquids supply outlook now sees upstream capacity attain 101.5 mb/d by 2016, average yearly growth of 1.3 mb/d, with the outlook for Iraq, Libya and the Americas stronger than in June. Meanwhile, global crude distillation capacity additions for 2010-2016 are trimmed by 0.9 mb/d, but remain a substantial 8.7 mb/d.

About JWM Energy Consultant
Professional Energy Consultant. I advise large energy-users on procurement strategies to reduce electricity and natural gas costs.

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