WORLD OIL SUPPLY
Non-OPEC oil supply in 2018 was revised up by 73 tb/d from the previous MOMR to average 59.62 mb/d, representing an increase of 2.08 mb/d y-o-y. The main reason for this upward revision was an adjustment for the Chinese supply forecast due to the higher-than-expected oil output in 1H18.
Non-OPEC oil supply in 2019 is projected to reach an average of 61.75 mb/d, indicating an upward revision by 106 tb/d, mostly due to a re-assessment of the Chinese supply forecast for the next year.
However, y-o-y growth was revised up by only 34 tb/d, to average 2.13 mb/d, owing to downward revisions in the US and Australian supply forecasts. The US, Brazil, Canada, the UK, Kazakhstan, Australia and Malaysia are the main growth drivers; while Mexico and Norway are expected to see the largest declines. The 2019 forecast remains subject to many uncertainties. OPEC NGL production in 2018 and 2019 is expected to grow by 0.12 mb/d and 0.11 mb/d to average 6.36 mb/d and 6.47 mb/d, respectively. In July, OPEC production increased by 41 tb/d to average 32.32 mb/d, according to secondary sources.
WORLD OIL DEMAND IN 2018 AND 2019
The outlook for 2018 and 2019 Middle East oil demand is still positive however, with risks skewed to the downside. Some factors that may curb oil demand in the region during 2018 and 2019 are domestic petroleum product retail prices, fuel substitution, as well as developments in the economies of the region’s main oil consumers, according to OPEC Monthly Oil Market Report-August 2018
THE OIL FUTURES MARKET
Crude oil futures experienced mixed movement in July. For the second successive month, ICE Brent crude oil futures ended the month lower, but remained near $75/b. Brent was also pressured by concerns that global trade tensions could crimp global economic growth. On the other hand, NYMEX WTI futures surged near 5%, to settle above the $70/b for the first time since November 2014, supported by bullish US demand data on the back of strong US economic growth figures and as crude stocks in the US fell to their lowest since February 2015. Oil prices were also supported by the temporary suspension of oil shipments through a strait in the Red Sea and an easing of trade tensions between the US and the European Union.
ICE Brent averaged 99¢, or 1.3%, m-o-m lower at $74.95/b in July, while NYMEX WTI rose $3.26/b, or 4.8%, m-o-m to average $70.58/b. Year-to-date, ICE Brent is $19.53, or 37.4%, higher at $71.72/b, while NYMEX WTI climbed $16.70, or 33.7%, to $66.20/b, compared to the same period a year earlier.
In line with the weakening of Brent, DME Oman also dropped 71¢, or 1%, m-o-m to settle at $72.92/b. Year todate, DME Oman was up $18.12/b, or 35.6%, to stand at $68.93/b, compared to the same period in 2017. Crude oil futures prices slipped in the second week of August. On 10 August, ICE Brent stood at $72.81/b and NYMEX WTI at $67.63/b.
In Saudi Arabia, the first six months of 2018 indicate around 4% y-o-y decline in oil requirements, due mainly to sluggish volumes for crude direct use, as well as diesel oil and residual fuel oil mainly in the industrial sector, in addition to substitution with natural gas.
Weak oil demand in the first six months of 2018 was also observed in Iraq. Demand for all the main petroleum product categories was solid, except for jet kerosene, which fell slightly. Losses were substantial in crude direct use, largely as a result of fuel substitution with natural gas and, to some extent, residual fuel oil.
OTHER COUNTRIES IN THE REGION
Year-to-date in 2018 oil demand fell in Qatar, while it grew in the UAE and Kuwait.
The outlook for 2018 and 2019 Middle East oil demand is still positive however, with risks skewed to the downside.
Some factors that may curb oil demand in the region during 2018 and 2019 are domestic petroleum product retail prices, fuel substitution, as well as developments in the economies of the region’s main oil consumers. For 2018, Middle East oil demand is forecast to grow by 0.02 mb/d, while oil demand in 2019 is projected to increase by