Summary
Crude Oil Price Movements
In September, the OPEC Reference Basket (ORB) rose by $7.27, or 8.3%, m-o-m to average $94.60/b. The ICE Brent front-month contract increased by $7.48, or 8.8%, m-o-m to $92.59/b, and the NYMEX WTI front-month contract rose by $8.11, or 10.0%, m-o-m to average $89.43/b. The DME Oman front-month contract rose by $6.90, or 8.0%, m-o-m to settle at $93.37/b. The front-month ICE Brent/NYMEX WTI spread narrowed in September by 63¢ to average $3.16/b. The market structure strengthened and the front end of the futures forward curves for ICE Brent, NYMEX WTI and DME Oman steepened amid improving sentiment about the short-term market outlook. Hedge funds and other money managers raised their total net long positions in ICE Brent and NYMEX WTI last month anticipating a rally in oil futures.
World Economy
The forecast for world economic growth in 2023 is revised up slightly to 2.8% but remains unchanged for 2024 at 2.6%. US economic growth in 2023 is revised up to 2%, but remains at 0.7% for 2024. Eurozone economic growth is revised down in both 2023 and 2024 to stand at 0.5% and 0.7%, respectively. Japan’s economic growth forecast for 2023 is revised up to 1.7%, while growth in 2024 remains at 1.0%. The forecast for China remains unchanged at 5.2% and 4.8% for 2023 and 2024, respectively. India’s growth forecast for 2023 is revised up to 6.2%, while growth for 2024 remains at 5.9%. Brazil’s forecast is revised up to 2.5% in 2023, while growth for 2024 remains at 1.2%. Russia’s economic growth forecast for 2023 is revised up to 1.5%, while the growth forecast for 2024 remains at 1.0%.
World Oil Demand
The world oil demand growth forecast for 2023 remains unchanged at 2.4 mb/d. Downward revisions in the OECD are due to actual data for the first three quarters, while upward revisions in non-OECD in the 2Q23 and 3Q23 are due to higher-than-expected growth, mainly from China. In the OECD, oil demand in 2023 is expected to rise by around 0.1 mb/d, while oil demand in non-OECD is expected to increase slightly to above 2.3 mb/d. For 2024, world oil demand is expected to grow by a healthy 2.2 mb/d, unchanged from the previous month’s assessment. The OECD is expected to grow by about 0.3 mb/d in 2024, with OECD Americas contributing the largest increase. The non-OECD is set to drive next year’s growth, increasing by about 2.0 mb/d, with China, India, the Middle East, and Other Asia contributing the most.
World Oil Supply
Non-OPEC liquids supply growth forecast for 2023 is revised up to 1.7 mb/d. Main drivers of liquids supply growth for 2023 include the US, Brazil, Norway, Kazakhstan, Guyana and China. For 2024, non-OPEC liquids supply is expected to grow by 1.4 mb/d, unchanged from the previous month’s assessment. Main drivers for liquids supply growth next year are set to be the US, Canada, Guyana, Brazil, Norway and Kazakhstan. The largest declines are anticipated in Mexico and Malaysia. OPEC NGLs and non-conventional liquids are forecast to grow by around 50 tb/d in 2023 to average 5.4 mb/d and by another 65 tb/d to average 5.5 mb/d in 2024. OPEC-13 crude oil production in September increased by 273 tb/d m-o-m to an average 27.75 mb/d, according to available secondary sources.
Product Markets and Refining Operations
In September, refinery margins came under pressure and showed a counter-seasonal drop following multi-month highs seen in the previous month. Stronger crude prices weighed on product crack spreads nearly all across the barrel despite lower product output due to the start of a heavy turnaround season. Over the month, the seasonal decline in gasoline demand – and subsequent gasoline stock builds – led to a drop in prices for that product in the US Gulf Coast and Rotterdam, while all other product prices showed a rise. In Singapore, fuel oil was the only product to show a price decline affected by ample supplies in the region. Global refinery intake fell by 1.4 mb/d m-o-m in September to average 81.1 mb/d.
Tanker Market
Dirty freight rates showed mixed movement in September. Despite some strength in the second half of the month, VLCCs spot freight rates continued the decline in September, down from peaks seen earlier in June. Rates on the Middle East-to-West route led losses, falling 13%. Suezmax and Aframax spot freight rates showed a mixed performance. Suezmax rates on the US Gulf Coast-to-Europe route declined 15%, while rates on the West Africa-to-US Gulf Coast route rose 5% amid a pickup in tanker demand. In the Aframax market, rates on the Caribbean-to-US East Coast route experienced a strong seasonal decline of 22%, while rates on the Mediterranean-to-Northwest Europe route rose 8%, supported by temporary tightness in the market mid-month. In contrast, clean spot freight rates on average saw an improvement. Rates rose around the Mediterranean, as available tonnage remained tight, as well as in the Far East amid a pickup in activity in the regional product market.
Crude and Refined Products Trade
Preliminary data shows US crude imports remained at strong levels in September, averaging 6.9 mb/d, the highest since August 2019. US crude exports also increased slightly to average 4.3 mb/d, representing a six-month high. China’s crude imports surged in August, averaging 12.5 mb/d, the third highest on record. Product exports from China rose further to reach a five-month high, supported by a new round of product export quotas. India’s crude imports continued to decline to a 10-month low of 4.4 mb/d in August, as the monsoon season weighed on domestic demand. India’s product exports reached a five-month high, driven by outflows of fuel oil, jet fuel and other products. Japan’s crude imports recovered further in August, averaging 2.5 mb/d, an increase of almost 7% m-o-m. Japan’s product exports rose with gains driven by gasoline and kerosene. Preliminary estimates show OECD Europe crude imports reaching a peak in July before slipping seasonally over the subsequent two months.
Commercial Stock Movements
Preliminary August 2023 data sees total OECD commercial oil stocks down by 11.0 mb m-o-m. At 2,803 mb, they were 182 mb lower than the 2015–2019 average. Within the components, crude stocks fell by 26.0 mb m-o-m, while products stocks rose by 15.0 mb m-o-m. OECD commercial crude stocks stood at 1,348 mb in August, which is 99 mb lower than the 2015–2019 average. By contrast, total product inventories rose by 15.0 mb in August to 1,455 mb, which is 83 mb below the 2015–2019 average. In terms of days of forward cover, OECD commercial stocks rose by 0.2 days m-o-m in August to stand at 61.1 days, which is 2.0 days below the 2015–2019 average.
Balance of Supply and Demand
Demand for OPEC crude in 2023 is revised down by 0.1 mb/d from the previous month’s assessment to stand at 29.1 mb/d, which is 0.7 mb/d higher than in 2022. Demand for OPEC crude in 2024 is also revised down by 0.1 mb/d from the previous month’s assessment to stand at 29.9 mb/d, 0.8 mb/d higher than the estimated level in 2023.
