The OPEC Reference Basket (ORB) averaged $89.73/b in November, falling m-o-m by $3.89, or 4.2%. The ICE Brent front-month fell $2.74, or 2.9%, to average $90.85/b, and NYMEX WTI decreased by $2.64, or 3.0%, to average $84.39/b. The Brent/WTI futures spread narrowed further m-o-m, contracting by 10¢ to average $6.46/b. The market structure of ICE Brent and NYMEX WTI weakened significantly, and the first-to-third month spreads moved temporarily into contango in late November. The combined futures and options net long positions of hedge funds and other money managers fell significantly in both ICE Brent and NYMEX WTI.
The world economic growth forecast is revised up marginally to 2.8% for 2022, after slightly better-than-expected 3Q22 GDP growth in a few economies. The 2023 global economic growth forecast remains unchanged at 2.5%. For the US, GDP growth in 2022 is revised up to 1.7%, while the forecast for next year remains unchanged at 0.8%. Euro-zone economic growth for 2022 remains at 3%, and is also unchanged for 2023 to stand at 0.3%. Japan’s economic growth forecast remains at 1.5% for 2022 and 1% for 2023. China’s 2022 growth forecast remains at 3.1% for 2022 and at 4.8% for 2023. The forecasts for India remain at 6.5% for 2022 and 5.6% for 2023. Brazil’s economic growth forecast is revised up to 2.4% for 2022, but remains unchanged at 1% for 2023. The 2022 forecast for Russia is revised up to a contraction of 5% followed by growth of 0.2% in 2023. With this, risks to global economic growth remain skewed downward due to challenges including high inflation, monetary tightening by major central banks, high sovereign debt levels in many regions and some ongoing supply chain issues. Moreover, geopolitical risks and the pace of the COVID-19 pandemic during winter remain uncertain.
The world oil demand forecast for 2022 remains unchanged at 2.5 mb/d. The oil demand was adjusted higher in the 3Q22, amid better-than-anticipated transportation fuel consumption in OECD, offset by a downwardly-revised estimate for 4Q22 due to a slowdown in the non-OECD amid reduced mobility and sluggish industrial activity in China. For 2023, world oil demand growth also remains unchanged at 2.2 mb/d, with the OECD growing by 0.3 mb/d and non-OECD growth forecast at 1.9 mb/d. This forecast is subject to many uncertainties including global economic developments, COVID-19 containment measures mainly in China and ongoing geopolitical tensions.
Non-OPEC liquids supply is forecast to grow by 1.9 mb/d for 2022, broadly unchanged from last month’s assessment. Upward revisions to liquids production in OECD Americas, Russia and Latin America were offset by downward revisions to OECD Europe, Other Eurasia and Other Asia. The main drivers of liquids supply growth for the year are expected to be the US, Canada, Guyana, Russia, China and Brazil, while production is expected to decline mainly in Norway and Thailand. For 2023, non-OPEC liquids production growth remains largely unchanged and is expected to grow by 1.5 mb/d. The main drivers of liquids supply growth are expected to be the US, Norway, Brazil, Canada, Kazakhstan and Guyana, whereas oil production is forecast to decline mainly in Russia and Mexico. Nonetheless, large uncertainties persist around geopolitical development in Eastern Europe, as well as the US shale output potential next year. OPEC NGLs and non-conventional liquids are forecast to grow by 0.1 mb/d in 2022 to average 5.39 mb/d and by 50 tb/d to average 5.44 mb/d in 2023. OPEC-13 crude oil production in November decreased by 744 tb/d m-o-m to average 28.83 mb/d, according to available secondary sources.
Refinery margins in the Atlantic Basin underwent a downward correction in November. This was due to the increasing refinery intakes as heavy refinery repair works subsided. The recovery in product output levels exerted pressure on product crack spreads, particularly those of gasoil/diesel. In Asia, however, margins continued to improve, supported by lower Dubai prices. Strong regional product demand led to stronger markets for all products across the barrel with the exception of gasoil/diesel. Global refinery processing rates began to recover during the month of November and rose by 2.1 mb/d in response to a decline in offline capacity amid the end of peak refinery maintenance. Refinery intakes are expected to continue to recover in December, increasing by almost the same amount, according to preliminary data.
Dirty freight rates continued to move higher in November, with strong gains on all monitored routes. Aframax rates saw the strongest gains as refiners loaded-up on Russian crude ahead of EU sanctions. An ongoing shift to longer-haul routes due to trade dislocations also weighed on tanker availability. Aframax rates on the intra-Mediterranean route rose 43% m-o-m in November and stood well above the levels seen in recent years. Suezmax rates saw similar support, with rates on the US Gulf to Europe route up 31% m-o-m. VLCCs showed continued steady gains, up around 21% on average. Clean spot freight rates on medium-range vessels were up 13% both East and West of Suez, amid tight tonnage availability.
US crude imports recovered from a six-month low to average 6.3 mb/d in November, while US crude exports reached a fresh record high of 4.2 mb/d, according to estimates based on weekly data. China’s crude imports continued to recover in October, averaging 10.2 mb/d. China’s product exports fell back from a 15-month high with declines across most major products. India’s crude imports recovered the previous month’s losses, averaging 4.2 mb/d in October. Product exports from India declined by around 21%, with diesel outflows sharply lower. Japan’s crude imports continued to slip from a two-year high to average 2.7 mb/d in October, in line with seasonal developments, but still showed 15 months of consecutive y-o-y gains. Tanker tracking data showed crude imports into the OECD Europe region remained steady in 3Q22 before dipping in November. Imports of Russian crude into OECD Europe were down by close to 1.0 mb/d y-o-y in November, ahead of the implementation of EU sanctions, although flows to Turkey increased sharply reaching as high as 400 tb/d, according to tanker tracking data, up from relatively minor levels last year.
Preliminary October data sees total OECD commercial oil stocks up m-o-m by 22.5 mb. At 2,748 mb, they were 15 mb less than the same time one year ago, 167 mb lower than the latest five-year average and 197 mb below the 2015-2019 average. Within the components, crude and product stocks rose m-o-m by 12.9 mb and 9.5 mb, respectively. At 1,335 mb, OECD crude stocks were 8 mb higher than the same time a year ago, but 80 mb lower than the latest five-year average and 118 mb lower than the 2015-2019 average. OECD product stocks stood at 1,413 mb, representing a deficit of 23 mb from the same time a year ago, 87 mb lower than the latest five-year average and 79 mb below the 2015-2019 average. In terms of days of forward cover, OECD commercial stocks rose m-o-m by 1.0 day in October to stand at 59.1 days. This is 0.6 days below October 2021 levels, 4.0 days less than the latest five-year average and 3.3 days lower than the 2015-2019 average.
Demand for OPEC crude in 2022 remained unchanged from the previous month’s assessment to stand at 28.6 mb/d, which is around 0.5 mb/d higher than in 2021. Demand for OPEC crude in 2023 also remained unchanged from the previous month’s assessment to stand at 29.2 mb/d, which is 0.6 mb/d higher than in 2022.