‘Grim economic news’ pressures oil —
The International Energy Agency (IEA) commented in its January Oil Market report that the downward pressure on oil was due to a small number of large factors. The one that should worry economists and national leaders is that “grim economic news” was at the top of the list.
The other two primary causes were a warm winter across much of the Northern Hemisphere and oversupply. In the report, the IEA experts wrote: Persistent oversupply, bloated inventories and a slew of negative economic news pressured prices so that by midJanuary crude oil touched 12-year lows. The OMR outlook for 2016 has demand growth moderating to 1.2 million b/d.
Global oil supplies expanded by 2.6 mb/d last year, following hefty gains of 2.4 mb/d in 2014. By last December, however, growth had eased to 0.6 mb/d, with lower nonOPEC production that pegged below year-earlier levels for the first time since September 2012.
OPEC crude output eased by 90,000 barrels per day in December to a still-lofty 32.28 mb/d, including newly rejoined Indonesia. Iran, now relieved of sanctions, insists it will boost output by an i mmediate 500,000 b/d. Our assessment is that around 300,000 b/d of additional crude could be flowing to world markets by the end of the current quarter.
Global inventories rose by a notional 1 bln barrels in 201415, with the fundamentals suggesting a further build of 285 mln barrels over the course of this year. Despite significant capacity expansions in 2016, this stock build will put storage infrastructure under pressure and could see floating storage become profitable.
Global refinery runs averaged 79.5 m b/d in the fourth quarter of 2015, down 0.3 mb/d from the estimate in last month’s OMR due to lower-than-expected throughputs in non-OECD Asia except China and a very high maintenance schedule in October.
Global refinery margins weakened in December as middle distillate cracks fell and overwhelmed the resilience of gasoline and naphtha.