The OPEC Reference Basket rebounded by $2.70 in December to settle at $107.67/b. In annual terms, the Basket price averaged around $106/b in 2013, a decline of around $3.50 compared to the previous year. In 2013, WTI futures gained nearly $4 to average about $98/b and North Sea Brent futures fell $3 to average around $109/b. Overall, price volatility in crude markets remained low in 2013.
World Economy
World economic growth for 2013 and 2014 remains at 2.9% and 3.5% respectively. The OECD economies are recovering and are expected to grow in 2014 at 1.9%, compared to 1.2% in 2013, unchanged from previous month’s forecast. China’s growth remains unchanged at 7.8% for both 2013 and 2014, while India’s forecast remains at 4.7% and 5.6%.
World Oil Demand
World oil demand growth for 2013 was revised up by 70 tb/d to stand at 0.9 mb/d. The upward revisions in OECD Americas and Europe reflect the most recent data. For 2014, growth is expected to increase to around 1.0 mb/d, unchanged from the previous month.
World Oil Supply
Non-OPEC oil supply growth in 2013 is estimated at 1.2 mb/d, up by 50 tb/d from the previous month’s report. The forecast for the current year was also revised higher, up 70 tb/d to 1.3 mb/d. Growth is seen coming mainly from the US, Canada, Brazil and the Sudans, while Norway, UK and Mexico are seen declining in 2014. OPEC NGLs are expected to increase by 150 tb/d in 2014. OPEC crude production averaged 29.44 mb/d in December, according to secondary sources, indicating a drop of 20 tb/d.
Product Markets and Refining Operations
Product markets saw a mixed performance with the top of the barrel strengthening as naphtha continues to be strong on the back of higher petrochemical demand. However this was outweighed by fuel oil losses, which caused margins to drop in the Atlantic Basin. In Asia, refinery margins showed some recovery on the back of stronger seasonal demand.
Tanker Market
Spot freight rates saw a significant increase in December in both dirty and clean tanker fixtures, due to high market activities, tight vessel availability and weather delays.
Stock Movements
OECD commercial stocks fell in November driven by a decline in both crude and products. Crude showed a surplus of 56 mb over the five-year average, while products indicated a deficit of 87 mb. OECD commercial stocks stood at 58.1 days of forward cover. Preliminary data for December indicates a seasonal drop in US commercial stocks for both crude and products.
Balance of Supply and Demand
Demand for OPEC crude remains unchanged in 2013 and 2014. Required OPEC crude for 2013 is estimated at 29.9 mb/d, representing a decrease of 0.5 mb/d from the previous year. In 2014, demand for OPEC crude is forecast at 29.6 mb/d, a drop of 0.4 mb/d from last year.