The OPEC Reference Basket (ORB) fell by $8.31, or 9.9%, m-o-m to average $75.82/b in May. The ICE Brent front-month contract declined by $7.68, or 9.2%, m-o-m to $75.69/b, and NYMEX WTI front-month contract declined by $7.82, or 9.8%, m-o-m to average $71.62/b. The DME Oman front-month contract declined by $8.69, or 10.4% m-o-m, to settle at $74.78/b. The front-month ICE Brent/NYMEX WTI spread widened by 14¢ m-o-m to average $4.07/b in May. The futures forward curves of ICE Brent, NYMEX WTI and DME Oman weakened during the month, and hedge funds and other money managers heavily cut bullish positions in ICE Brent and NYMEX WTI.
World economic growth is estimated at 3.3% for 2022 and forecast at 2.6% for 2023, both unchanged from the previous month’s assessment. While economic activities have been steady so far in the 1H22, the global economy continues to navigate through uncertainties including high inflation, higher interest rates in the US and the Euro-zone, and high debt levels in many regions. The US economic growth forecast for 2023 is revised up by 0.1% to stand at 1.3%, following a growth of 2.1% for 2022. The Euro-zone’s economic growth forecast for 2023 remains at 0.8%, following a growth of 3.5% for 2022. Japan’s economic growth forecast remains at 1.0% for both 2022 and 2023. China’s economic growth forecast remains at 5.2% for 2023, following a growth of 3.0% for 2022. India’s 2022 economic growth estimate is unchanged at 6.7%, and the forecast for 2023 remains at 5.6%. Brazil’s economic growth estimates for 2022 and 2023 are unchanged at 2.9% and 1.0%, respectively. Russia’s growth is also unchanged, with an estimated contraction of 2.1% for 2022 and a forecast contraction of 0.5% for 2023.
The world oil demand growth estimate for 2022 remains unchanged from last month’s assessment, with y-o-y growth of 2.5 mb/d. For 2023, the forecast for world oil demand growth remains broadly unchanged at 2.3 mb/d. China, Latin America, and the Middle East have been revised up slightly, while OECD Europe, Other Asia and Africa have been adjusted slightly lower. The OECD is expected to grow by about 50 tb/d and the non-OECD by about 2.3 mb/d in 2023.
Non-OPEC liquids supply is estimated to have grown by 1.9 mb/d in 2022, broadly unchanged from the previous month’s assessment. The main drivers of liquids supply growth for 2022 were the US, Russia, Canada, Guyana, China and Brazil, while the largest declines were seen in Norway and Thailand. For 2023, non-OPEC liquids production growth remains unchanged from last month’s assessment, at 1.4 mb/d, y-o-y. The main drivers of liquids supply growth are expected to be the US, Brazil, Norway, Canada, Kazakhstan and Guyana, while declines are expected primarily from Russia. Uncertainties remain related to US shale oil output potential and unplanned maintenance in 2023. 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 May decreased by 464 tb/d m-o-m to average 28.06 mb/d, according to available secondary sources.
Refinery margins in the US Gulf Coast (USGC) declined for the second-consecutive month in May to their lowest level this year. This downturn – attributable to rising refinery product output levels – was considerably more limited than that seen in April, with most of the decline driven by transport fuels. In Rotterdam, margins showed solid gains backed by stronger gasoline and fuel oil markets. Lower feedstock prices provided further support and led to mild gains for Asian refining economics. Preliminary estimates indicate that the global refinery intake rose further m-o-m in May, increasing 556 tb/d to average 81.3 mb/d.
Dirty freight rates showed mixed movement in May. VLCCs experienced m-o-m declines on all monitored routes, with Middle East-to-East spot freight rates falling 27% as long-haul tanker demand declined. Suezmax rates recovered some of the previous month’s losses, with rates on the USGC-to-Europe route increasing 35%. Aframax spot freight rates showed a strong performance on the Caribbean-to-US East Coast route, which jumped 121%, while Mediterranean routes saw a mixed performance, with intra-Med rates up 2% and Mediterranean-to-Northwest Europe rates down 9%. Clean freight rates showed declines on all reported routes, with the steepest losses on West of Suez routes.
Preliminary data shows US crude imports increased m-o-m in May to average 6.4 mb/d. US crude exports exhibited a still strong performance, averaging 4.3 mb/d, although lower than the record level of 4.8 mb/d achieved in March. China’s crude imports in April fell back from the high levels of the previous month, to average about 10.3 mb/d, although preliminary data shows a recovery in May to average 12.2 mb/d. China’s product imports jumped 26% to reach a record high of 2.2 mb/d, driven by inflows of LPG, naphtha and fuel oil. In April, India’s crude imports slipped further from the 10-month high seen in February to average a still robust 4.8 mb/d. India’s product exports fell sharply from last month’s high levels to average 1.1 mb/d. Japan’s crude imports recovered in April from seasonal lows, averaging 2.9 mb/d. Japan’s product exports, including LPG, continued to decline, averaging 378 tb/d in April, the lowest since the same month last year. Preliminary estimates for May show OECD Europe crude imports declined seasonally, while tanker tracking data shows product imports remaining close to year-ago levels.
Preliminary April 2023 data sees total OECD commercial oil stocks up m-o-m by 30.2 mb. At 2,808 mb, they were 144 mb higher than the same time one year ago, but 74 mb lower than the latest five-year average and 119 mb below the 2015–2019 average. Within the components, crude stocks fell by 0.5 mb, while product stocks rose m-o-m by 30.6 mb. OECD commercial crude stocks stood at 1,384 mb in April. This was 77 mb higher than the same time a year ago, but 42 mb below the latest five-year average and 88 mb lower than the 2015–2019 average. Total product inventories stood at 1,424 mb, representing a surplus of 66 mb above the same time a year ago, However, this was 32 mb lower than the latest five-year average and 30 mb below the 2015–2019 average. In terms of days of forward cover, OECD commercial stocks fell m-o-m by 0.1 days in April to stand at 60.9 days. This is 2.9 days above the April 2022 level, but 3.3 days lower than the latest five-year average and 1.3 days below the 2015–2019 average.
Demand for OPEC crude in 2022 remains unchanged from last month’s assessment at 28.4 mb/d. This is around 0.5 mb/d higher than in 2021. Demand for OPEC crude in 2023 also remains unchanged from the previous assessment at 29.3 mb/d. This is around 0.9 mb/d higher than in 2022.