The OPEC Reference Basket (ORB) declined by 63¢, or 0.8%, m-o-m to average $75.19/b in June. The ICE Brent front-month contract fell by 71¢, or 0.9%, m-o-m to $74.98/b, and the NYMEX WTI front-month contract declined by $1.35, or 1.9%, m-o-m to average $70.27/b. The DME Oman front-month contract rose by 13¢, or 0.2%, m-o-m to settle at $74.91/b. The front-month ICE Brent/NYMEX WTI spread widened by 64¢ m-o-m to average $4.71/b in June. 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, extending the previous month's selloffs.
World economic growth in 2023 remains broadly unchanged at 2.6% and the initial forecast for 2024 economic growth is expected at 2.5%. US economic growth for 2023 is revised up slightly to stand at 1.4%, followed by 0.7% for 2024. Euro-zone economic growth for 2023 is revised down slightly to stand at 0.7%, while growth in 2024 is forecast at 0.8%. Japan’s economic growth for 2023 is revised up slightly to 1.1%, while growth in 2024 is forecast at 1.0%. China’s 2023 economic growth remains at 5.2%, with economic growth forecast in 2024 at 4.8%. India’s economic growth remains at 5.6% in 2023 and is expected to expand by 5.9% in 2024. Brazil’s economic growth in 2023 is revised up to 1.3% and is expected to grow by 1.1% in 2024. Russia’s economic growth in 2023 is revised up to 0.4% and a further recovery is anticipated for 2024 with a growth forecast of 0.8%.
World oil demand is expected to grow by 2.4 mb/d in 2023, following an upward revision of about 0.1 mb/d from last month’s assessment, mainly due to higher demand seen in China in 2Q23. OECD Americas is revised up slightly to account for a better-than-expected performance in the US in 2Q23. Similarly, OECD Europe is revised up slightly in 1Q23. In the non-OECD, demand was also revised upward to account for bullish oil demand seen in China in 2Q23 and a slight improvement in Latin America over the same period. For 2024, world oil demand is forecast to grow by a healthy 2.2 mb/d, reaching about 104.25 mb/d. The OECD is anticipated to expand by 0.26 mb/d, with OECD Americas contributing the largest increase. The non-OECD is set to drive growth, increasing by almost 2.0 mb/d, with China, the Middle East and other Asia accounting for the bulk of this growth, with further support from India, Latin America, and Africa.
Non-OPEC liquids supply is expected to expand by 1.4 mb/d in 2023, broadly unchanged from the previous month’s assessment. The main drivers of liquids supply growth for 2023 are expected to be the US, Brazil, Norway, Canada, Kazakhstan and Guyana, while the decline is expected mainly in Russia. There remain uncertainties related to US shale oil output potential and unplanned maintenance in 2023. For 2024, non-OPEC liquids production is expected to grow by 1.4 mb/d. The main drivers for liquids supply growth are expected to be the US, Canada, Guyana, Brazil, Norway and Kazakhstan, while the largest declines are expected in Mexico and Azerbaijan. OPEC NGLs and non-conventional liquids are forecast to grow by 50 tb/d in 2023 to an average of 5.44 mb/d and by another 65 tb/d to an average of 5.51 mb/d in 2024. OPEC-13 crude oil production in June increased by 91 tb/d m-o-m to an average 28.19 mb/d, according to available secondary sources.
Refinery margins rose in June to show solid gains across regions. In the US Gulf Coast (USGC), margins recovered from the previous months’ losses to reach a three-month high. Gains were seen across the barrel, particularly for gasoline, as firm-driving activities supported product markets. In Rotterdam, refining margins were mostly supported by a strong performance at the middle and bottom sections of the barrel, while temporary unplanned outages led to a contraction of product balances in Northwest Europe and this weighed on ARA key product inventories. In Singapore, margin gains were more limited, as the strength in transport fuels was partly offset by negative performance in naphtha and high sulphur fuel oil (HSFO) markets. Global refinery intake in June continued to trend upwards and was 953 tb/d higher m-o-m at 81.9 mb/d, according to preliminary estimates. In the coming months, refinery intakes are expected to continue to be supported by seasonal fuel consumption.
Dirty freight rates continued to show mixed movement in June. VLCCs partially recovered from the previous month’s decline, with Middle East-to-East spot freight rates up 27% m-o-m, amid increased flows to the East. A pickup in Atlantic basin activity and on eastward routes helped to firm sentiment in the larger vessel class, supporting rates. Suezmax rates returned some of the previous month’s gains, with rates on the USGC-to-Europe route declining 20%, amid more limited activity. Aframax spot freight rates fell across the board, with rates on the Caribbean-to-US East Coast route dropping back from the very strong levels seen in May, down by 34%. Clean freight rates experienced declines across all reported routes in June, as West of Suez rates softened again and momentum in the East of Suez market dissipated further. Rates on the Middle East-to-East route fell by 16% m-o-m, while rates on the Singapore-to-East route fell 23% m-o-m.
Preliminary data show US crude imports continued to pick up seasonally in June to average 6.5 mb/d. US crude exports recovered to an average of 4.1 mb/d, a three-month high. The latest data for China shows crude imports rebounding in May to average around 12.1 mb/d. The high level was driven by new capacity coming on-stream and a return of refineries from maintenance. China’s product imports increased for the fourth consecutive month, reaching a record high of just under 2.5 mb/d. Gains were driven largely by outflows of LPG and fuel oil. India’s crude imports in May declined for the third month in a row, averaging 4.7 mb/d. In contrast, both India’s product imports and exports recovered from losses in the previous month m-o-m. Japan’s crude imports averaged 2.5 mb/d in May, a drop of 0.4 mb/d, or almost 15%, m-o-m. Japan’s product imports fell for the second consecutive month, driven primarily by a decline in naphtha inflows, which offset gains in gasoline and gasoil. Preliminary estimates show OECD Europe crude imports above March levels, amid increased flows to the Netherlands and France, although these were lower than in the same month last year. Product imports into the region are expected to move seasonally higher, supported by inflows to Turkey, remaining close to year-ago levels in May and June.
Preliminary May 2023 data sees total OECD commercial oil stocks up m-o-m by 20.2 mb. At 2,815 mb, they were 101 mb lower than the latest five-year average and 140 mb below the 2015–2019 average. Within the components, crude and products stocks rose by 4.1 mb and 16.1 mb, respectively. OECD commercial crude stocks stood at 1,401 mb in May. This was 34 mb below the latest five-year average and 84 mb lower than the 2015–2019 average. Total product inventories stood at 1,414 mb, which was 67 mb lower than the latest
five-year average and 56 mb below the 2015–2019 average. In terms of days of forward cover, OECD commercial stocks fell m-o-m by 0.4 days to stand at 60.2 days. This is 3.5 days lower than the latest five-year average and 1.8 days less than the 2015–2019 average.
Demand for OPEC crude in 2023 is revised up by 0.1 mb/d from the previous month’s assessment to stand at 29.4 mb/d. This is around 1.0 mb/d higher than in 2022. Based on the initial world oil demand and non-OPEC supply forecast for 2024, demand for OPEC crude is expected to reach 30.2 mb/d, 0.8 mb/d higher than the 2023 level.