The OPEC Reference Basket averaged $100.65/b in May, representing a slight decline of 40¢ from the previous month. Year-to-date, the Basket value declined $9.75 or 8.4% compared to the same period last year to stand at $105.85/b. The performance of Basket components was mixed. While the Middle Eastern spot-related crudes fell the most, the Latin American grades improved. Nymex WTI and ICE Brent prices moved in opposite directions in May. US light crude futures rose sharply on the easing overhang in inventories in the US Midwest, as well as recent macroeconomic data pointing to a gradual improvement in the US economy. In contrast, the ICE Brent contract was affected by the persistently weak economic outlook in Europe, as well as poor Chinese economic growth, amid improving crude oil supplies. Nymex WTI gained $2.73 to average $94.80/b for the month, while ICE Brent slipped 15¢ to average $103.28/b.
World economic growth is forecast at 3.2% for 2013, unchanged from the previous month, although with some revisions to the individual forecasts. Japan’s forecast has been revised higher to 1.5% from 1.1% amid ongoing stimulus efforts. The Euro-zone’s challenges continue, with the forecast now showing a deeper contraction of 0.6%, although a recovery is expected for later in the year. While the possibility of some adjustment in the Fed's monetary stimulus exists, the recovery in the US housing and labour markets has been positive and GDP growth for 2013 remains unchanged at 1.8%. China has been impacted by decelerating activity and growth has been revised to 7.9% from 8.0%, while India’s forecast is unchanged at 6.0%. While the global economic momentum has started slowing recently, some rebound is currently forecast for the second half of the year.
World oil demand is expected to increase by 0.8 mb/d in 2013, in line with the growth seen last year. The forecast remains unchanged from the previous report, despite a downward revision to the first quarter due to actual data. In the non-OECD, oil consumption is projected to grow by 1.2 mb/d, slightly lower than last year. China is seen continuing to grow at 0.4 mb/d, the Middle East at 0.3 mb/d, and Other Asia and Latin America regions at 0.2 mb/d each. In contrast, OECD demand is expected to see a contraction of 0.4 mb/d, although a slight improvement over 2012.
Non-OPEC oil supply growth is projected at 1.0 mb/d in 2013, unchanged from the last report, supported by strong anticipated growth from the US. Estimated non-OPEC supply growth in 2012 stands at 0.5 mb/d. OPEC NGLs and nonconventional oils are expected to average 5.9 mb/d in 2013, a gain of 0.2 mb/d over the previous year. In May, OPEC crude oil production averaged 30.57 mb/d, according to secondary sources, an increase of 106 tb/d over last month.
Product markets exhibited a mixed performance in May. The top of the barrel strengthened slightly, with gasoline demand beginning to show signs of snapping out of its spring slump. However, the improvement in the top was not enough to offset losses at the middle of the barrel, as distillate demand remained weak, thus preventing any upward movement in refinery margins. Overall, the summer demand season has been off to a slow start on both sides of the Atlantic.
In the tanker market, dirty spot freight rates were mixed in May. Average VLCC rates have increased for both eastern and western destinations, mainly as a result of the end of the refinery maintenance. Meanwhile, average Suezmax and Aframax rates declined from a month earlier.
Clean spot freight rates fell East and West of Suez on the back of high tonnage availability. OPEC spot fixtures rose by 10% in May over the previous month and OPEC sailings were 1.2% higher.
Total OECD commercial oil stocks rose for the second consecutive month in April, up 19.2 mb, but remained broadly in line with the five-year average. Crude stocks stood at a comfortable level, with a surplus of 18 mb over the five-year average, while product inventories remained tight with a deficit of 19.0 mb with the seasonal average. In terms of days of forward cover, OECD commercial inventories stood at 59.1 days, some 1.1 days over the five-year average. Preliminary data for May shows that total US commercial oil stocks rose by 15.5 mb to show a surplus of 45.0 mb with the five-year average. US crude oil commercial stocks finished May at 35.9 mb over the five-year average, while products were 8.8 mb higher.
Demand for OPEC crude in 2012 stood at 30.2 mb/d, unchanged from the previous assessment and broadly in line with the 2011 level. Demand for OPEC crude in 2013 is forecast at 29.8 mb/d, unchanged from the previous report and 0.4 mb/d lower than last year.