Oil Market Highlights
§After three consecutive monthly gains, the OPEC Reference Basket declined in April to settle at
$118.18/b, representing a drop of $4.79 or 3.9%. Prices remain elevated by the risk premium
associated with ongoing geopolitical factors. The decline in the value of the Basket came with the
start of the first month of the typically low demand season in the second quarter. Crude prices
shifted into contango for the first time in over a year amid higher supplies and weak consumption.
The decline in crude oil prices occurred as refined product prices came down from the peak levels
seen in previous months. Moreover, rising global supply contributed to an increase in inventories,
preventing prices from moving higher. On 9 May, the OPEC Reference Basket stood at $109.85/b.
§World economic growth expectations for 2012 remain unchanged at 3.3%. The US continues to
enjoy solid momentum, with the growth forecast revised up by 0.1 pp to 2.3%. In contrast, the Eurozone
continues to weaken and is now expected to contract by 0.4%, compared to the minus 0.3%
forecast in the previous month. The growth forecast for Japan remains unchanged at 1.8%. With
these offsetting revisions in the OECD, growth in the export-led emerging economies is also
unchanged. India is expected to expand by 6.9% in 2012, while China is projected to grow at a solid
8.2%. Overall, the global economic outlook remains fragile, with heightened uncertainties in the
Euro-zone and potential spill-over effects in the emerging markets.
§World oil demand growth in 2012 now stands at 0.9 mb/d, broadly unchanged from the previous
report. Given the stabilization of the US economy and the shutdown of Japanese nuclear power
plants, world oil demand growth has – at least for the short-term – stopped its declining trend and is
showing some growth. Oil demand in non-OECD countries is also indicating a slight improvement.
The upcoming driving season in the US might be affected by higher retail gasoline prices and
uncertainty regarding economic developments. Japan’s oil usage also could slow if the country were
to restart its nuclear plants.
§Non-OPEC supply is forecast to grow by 0.6 mb/d in 2012, following an increase of 0.1 mb/d in
2011. This represents an upward revision of 50 tb/d over the previous report. The adjustment to this
year’s growth was mainly due to the release of preliminary 1Q12 data for actual production,
particularly for the US. OPEC NGLs and non-conventional oils in 2012 are expected to increase by
0.4 mb/d over the previous year. In April, total OPEC crude oil production, according to secondary
sources, was estimated to average 31.62 mb/d, an increase of 0.32 mb/d over the previous month.
§Product markets showed an uptick in April with gasoline taking advantage of the improved product
sentiment in the Atlantic Basin, ahead of the driving season. This, along with the additional support
from tight product supplies in the Asian region amid heavy refinery maintenance allowed refinery
margins to increase across the globe. The decline in crude oil prices also supported product
markets.
§The tanker market saw mixed movement in April, with VLCC spot freight rates increasing and
Suezmax and Aframax spot rates encountering declines. Lower tonnage demand and refinery
maintenance drove the decline in Suezmax and Aframax rates. The rise in VLCC spot freight rates
was supported by higher demand and floating storage requirements. In April, OPEC spot fixtures
decreased by 20%. Sailings from OPEC were higher and arrivals in North America increased.
§US commercial oil stocks in April reversed the build of the previous month, declining by
4.3 mb. US stocks remain 20.1 mb above the year-ago level and 30.8 mb over the five-year
average. Products, which fell by 17.5 mb, were responsible for the decline, as crude stocks rose
by 13.5 mb. In Japan, the most recent monthly data shows that commercial oil stocks increased
by 6.6 mb in March to stand 1.4 mb above a year ago, which was still 5.2 mb below the five-year
average. The total stock-build was concentrated in crude, which rose by 8.5 mb, while product
inventories fell 1.9 mb.
§Demand for OPEC crude for 2011 remained unchanged from the previous assessment to stand at
30.1 mb/d, indicating growth of 0.4 mb/d compared to the previous year. Demand for OPEC crude
for 2012 is projected to average 30.0 mb/d, the same level as in the previous report and
representing a decline of 0.1 mb/d from last year.