The OPEC Reference Basket (ORB) rose by $4.41, or 6.6%, in April month-on-month (m-o-m), to average $70.78/b. The ORB extended its gains during the month, reaching a six-month high, as the ongoing bullish market sentiment was fuelled by concerns about additional oil supply disruptions in the wake of new geopolitical risks in key oil producing regions. Crude oil futures prices also reached their highest level since last October on the back of improved market sentiment and robust oil market fundamentals amid oil supply outages. In April, ICE Brent was on average $4.60, or 6.9%, higher m-o-m at $71.63/b, while NYMEX WTI rose by $5.70, or 9.8%, m-o-m to average $63.87/b. DME Oman crude oil futures also increased m-o-m by $4.25, or 6.4%, over the previous month to settle at $71.20/b. The Brent and Dubai backwardation structures firmed with the front of the curves steepening further, while the NYMEX WTI contango structure narrowed. Hedge funds and other money managers added more bullish positions in April for both Brent and WTI.
The global economic growth estimate remains at 3.6% for 2018 and is forecast to grow by 3.2% in 2019, unchanged from the previous month’s assessment. Improving growth trends in some economies point at some stabilisation on a global level, but downside risks still prevail. In the OECD economies, US growth is revised up by 0.2 pp to 2.6% for 2019, compared to 2.9% for 2018. GDP growth in Japan is revised lower by 0.2 pp from 0.6% to 0.4% for 2019, following growth of 0.8% in 2018. Euro-zone 2018 growth remains unchanged at 1.2% for 2019, down from 1.8% for 2018. In the non-OECD economies, China’s 2019 growth forecast is now revised up by 0.1 pp, to stand at 6.2%, after reaching 6.6% in 2018. India’s 2019 growth forecast remains at 7.1%, following 7.3% in 2018. Growth in Brazil is revised lower to 1.7% from 1.8% for 2019, after seeing 1.1% in 2018, while Russia’s 2019 GDP growth forecast is unchanged at 1.6%, following growth of 2.3% for 2018.
In 2018, oil demand is estimated to have increased by 1.41 mb/d, unchanged from last month’s assessment, with total oil demand reaching 98.73 mb/d. OECD America and Other Asia led oil demand growth in 2018, with a combined increase of around 0.90 mb/d. For 2019, world oil demand growth is now forecast to increase by 1.21 mb/d, also unchanged from last month’s assessment, with total world consumption anticipated to reach 99.94 mb/d. Throughout the regions, there are revisions which broadly cancel each other out. Some positive upward revisions are accounted for in OECD Americas and China, due to better economic projections than in the previous month. On the other hand, some downward revisions are seen due to lower than expected oil demand data in Latin America and the Middle East during 1Q19, in addition to some downward adjustments to OECD Europe, Latin America and the Middle East for the entire year.
Non-OPEC oil supply growth in 2018 is revised up by a minor 0.01 mb/d from the previous month’s assessment, mainly due to an upward revision to Canada’s supply in 4Q18, which non-OPEC supply is now estimated to have grown by 2.91 mb/d to average 62.37 mb/d. In contrast, non-OPEC oil supply growth in 2019 is revised down by 0.03 mb/d to average 2.14 mb/d, mainly due to lower than expected output in 1Q19 in the US, Brazil and the UK, which is partially offset by upward revisions in China. Total supply for the year is now projected to average 64.52 mb/d. The US, Brazil, Russia, Australia and the UK are the main drivers for this year’s growth, while Mexico, Kazakhstan, Norway and Indonesia are projected to see the largest declines. OPEC NGLs and non-conventional liquids were revised downward for the years 2016 thru 2018. In addition, growth in OPEC NGLs and non-conventional liquids was revised upward by 83 tb/d y-o-y in 2018, reaching 4.76 mb/d, representing a growth of about at 0.13 mb/d, y-o-y. For 2019, OPEC NGLs and non-conventional liquids are forecast to grow by 0.08 mb/d to average 4.84 mb/d, a slight downward revision of 0.01 mb/d. In April 2019, OPEC crude oil production was broadly unchanged from the previous month to average 30.03 mb/d, according to secondary sources.
In April, refining margins globally saw a counter-seasonal positive performance, as the tightness in the gasoline market witnessed in the previous month prevailed, providing stimulus for trade flows amid limited product output. Meanwhile, the peak spring refinery maintenance season is slowly approaching its end. In all main trading hubs, markets of all other key products, with the exception of gasoline, witnessed losses, in line with seasonal trends and given the recently increasing supply-side pressure.
Average dirty tanker spot freight rates continued to decline from the high levels seen at the end of last year. Fixtures were lower on seasonal factors with the start of refinery maintenance being particularly pronounced this year as refiners gear up for the implementation of IMO 2020. In April, dirty tanker freight rates saw a decline compared to the previous month, with VLCCs and Aframax rates falling on average by 30% and 13%, respectively, partially offset by a 13% rise in Suezmax rates supported by West Africa-to-US Gulf Coast activity. Clean tanker spot freight rates continued to have a mixed performance in April, resulting in a 1% decline in rates on average compared to the previous month.
Preliminary data for March showed that total OECD commercial oil stocks rose by 3.3 mb m-o-m to stand at 2,875 mb. This was 58.5 mb higher than the same time one year ago, and 22.8 mb above the latest five-year average. Within the components, crude and products stocks indicated a surplus of 20.3 mb and 2.5 mb, respectively, above the latest five-year average. In terms of days of forward cover, OECD commercial stocks rose by 0.1 days m-o-m in March to stand at 60.6 days. This was 1.0 day above the same period in 2018 but 1.0 day below the latest five-year average.
Demand for OPEC crude in 2018 is estimated at 31.6 mb/d, 1.6 mb/d lower than the 2017 level. In 2019, demand for OPEC crude is forecast at 30.6 mb/d, around 1.0 mb/d lower than the estimated 2018 level.