Mar­ket Watch

Oil and Gas - - CONTENT -

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.

SAUDI ARA­BIA

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.

IRAQ

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

0.08 mb/d.

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