Crude Oil Price Movements
OPEC’s benchmark basket fell $9.17, or 7.8%, month-on-month in July, to average $108.55/bbl. Oil futures prices remained highly volatile in July amid a sharp decline in liquidity. First-month ICE Brent fell $12.38, or 10.5%, in July to average $105.12/bbl and NYMEX WTI fell $14.96, or 13, 1%, to reach an average of $99.38/bbl. The Brent/WTI futures spread widened a further $2.58 to average $5.74/bbl. The market structure of the three main crude benchmarks – ICE Brent, NYMEX WTI and DME Oman – remained in sharp decline, particularly Brent. This is despite a sharp decline in first month prices as the fundamental outlook remained solid. However, the offset structure flattened out during the first week of August. Hedge funds and other fund managers extended the July sell-off, reducing combined net long positions in futures and options in ICE Brent and NYMEX WTI to their lowest level since April 2020.
Global economic growth is revised down to 3.1% for 2022 and 2023. This is the result of weaker 2Q22 growth in major economies and a weak trend seen in some key economies. For the United States, GDP growth for 2022 is revised down to 1.8% and 1.7% for 2023. Eurozone economic growth for 2022 is expected at 3.2%, while growth in 2023 is revised down to 1.7%. Japan’s economic growth for 2022 is revised down to 1.4%, followed by 1.6% growth in 2023. China’s growth forecast for 2022 is revised down to 4.5%, while the forecast for 2023 remains unchanged at 5.0%. India’s forecast remains unchanged at 7.1% in 2022 and 6.0% in 2023. Brazil’s economic growth forecast remains at 1.2% in 2022 and 1.5% in 2023. for Russia in 2022 are unchanged, posting a contraction of 6.0% followed by a growth of 1.2% in 2023. Downside risks remain, stemming from persistent geopolitical tensions, the continuation of the pandemic, the ongoing supply chain issues, rising inflation, high levels of sovereign debt in many regions, and expected monetary tightening by central banks in the US, UK, Japan and China. eurozone.
World oil demand
Global oil demand growth in 2022 is revised down from the previous month’s assessment, but still shows healthy growth of 3.1 mb/d, including the recently seen trend of burning more crude in the production of electricity. Oil demand in the OECD area is expected to increase by 1.6 mb/d, while non-OECD demand is expected to grow by 1.5 mb/d. Total oil demand is expected to average around 100 mb/d in 2022. The first half of this year is revised upwards, amid better-than-expected oil demand in major OECD consuming countries . However, 2H22 oil demand is revised lower, amid expectations of a resurgence of COVID-19 related restrictions and lingering geopolitical uncertainties. For 2023, the global oil demand growth forecast remains unchanged at 2.7 mb/d, with total oil demand averaging 102.7 mb/d. The OECD should grow by 0.6 mb/d and the non-OECD by 2.1 mb/d. Oil demand in 2023 is expected to be supported by continued strong economic performance in major consuming countries, as well as improving geopolitical developments and improving COVID-19 in all regions.
world oil supply
Non-OPEC liquids supply growth in 2022 is forecast at 2.1 mb/d to an average of 65.8 mb/d, broadly unchanged from the previous assessment. An upward revision for Russia is offset by downward revisions for the United States, Norway and Kazakhstan. The main drivers of liquids supply growth for 2022 are expected to be the United States, Canada, Brazil, China and Guyana, while production is expected to decline mainly in Indonesia and Thailand. In 2023, non-OPEC liquids production growth remains unchanged at 1.7 mb/d to reach an average of 67.5 mb/d. The main drivers of growth in 2023 are expected to be the United States, Norway, Brazil, Canada and Guyana. However, uncertainty regarding the operational and financial aspects of US production, as well as the geopolitical situation in Eastern Europe remains high. OPEC NGLs and Unconventional Liquids are expected to increase by 0.1 mb/d in 2022 to an average of 5.4 mb/d and by 50 tb/d to an average of 5.4 mb/d in 2023. OPEC-13 crude oil production in July increased by 216 tb/d mum to 28.90 mb/d on average, according to available secondary sources.
Product markets and refining operations
Refining margins at all major trading centers reversed trends in July, falling back from multi-year highs set in June. A counter-seasonal slowdown in product demand in the United States and higher refinery throughput rates in Europe and Asia led to product stockpiling, partially mitigating the product tightening seen in recent months . At the same time, concerns over a weakening global economy and a darkening commodity market outlook likely contributed further to the slowdown in the global refining economy. This weakness was evident across the barrel in all regions as commodity prices retreated from record highs seen in June. Going forward, transportation fuel needs are expected to remain sustained in line with seasonal trends. Refinery inflows are expected to remain well supported to meet seasonal fuel consumption and allow continued replenishment of product inventories.
Dirty tanker spot freight rates in July have fully recovered from the decline seen earlier in May as trade disruptions boosted activity on the longer haul routes. VLCC fares on the Middle East-East route increased by 26%, while Western flows increased by 30%. The wide Brent/WTI spread has also made US crude more competitive in Asia, supporting VLCC demand. Aframax fares on the Mediterranean route to North West Europe increased by 38% on a monthly average, while Suezmax fares from the US Gulf to Europe increased by 23%, against a backdrop strengthening demand for longer flows to Europe. Equity rates fell after rising steadily in recent months, with particularly steep declines in the Mediterranean as trade dislocations generated volatility.
Trade in crude and refined products
Preliminary data shows U.S. crude imports hit a three-year high of 6.7mb/d in July, amid higher flows from OPEC members and Brazil. U.S. crude exports jumped to a record 3.7mb/d based on preliminary weekly data as the wide Brent/WTI spread spurred a return to Asian buying. China’s crude imports fell to a nearly four-year low of 8.7mb/d in June and are expected to remain at low levels as lockdown measures earlier in the year and a surge in buying triggered by geopolitical developments in February left inventories at a sufficient level. levels. India’s crude imports rose slightly, averaging 4.7mb/d in June, while Russia rose 0.9mb/d year-on-year according to secondary sources. India’s crude imports are expected to remain close to current levels in July, with Russian inflows remaining above 1.0mb/d but with slightly lower flows from elsewhere. Japan’s crude imports fell to an 11-month low in June, averaging 2.3mb/d, although they still managed to rise year-over-year. Japan’s crude oil imports are expected to recover as refineries return from maintenance in July. Preliminary figures show that rough imports from OECD Europe have remained at high levels in recent months, while rough exports fell to their lowest level in 7 years in April.
Movements of commercial stocks
Preliminary data from June indicates that total OECD commercial oil stocks increased by 20.9mb month-on-month. At 2,712mb, inventories were 163mb lower than the same period a year ago, 261mb lower than the last five-year average and 236mb lower than the 2015-2019 average. Within components, crude and product inventories increased by 6.4mb and 14.5mb, respectively, month-on-month. At 1,330mb, OECD crude inventories were 54mb lower year-on-year, 125mb lower than the last five-year average and 135mb lower than the 2015-2019 average. Stocks of OECD products stood at 1,381 mb, a deficit of 109 mb compared to the same month last year, 136 mb less than the last five-year average and 100 mb less than the average 2015-2019. In terms of days of futures coverage, OECD commercial stocks rose 0.1 months in June to 58.9 days. This represents 3.7 days less than June 2021 levels, 5.3 days less than the last five-year average and 2.9 days less than the 2015-2019 average.
Balance of supply and demand
OPEC crude demand in 2022 is revised down 0.3mb/d from the previous month’s estimate to 28.8mb/d, or about 0.9mb/d. d more than in 2021. Similarly, OPEC crude demand in 2023 is revised down by 0.3 mb/d from the previous month’s estimate to 29.8 mb/d, about 0.9 mb/d more than the 2022 level.