Oil and Gas



Developmen­ts in economic and industrial activities in various countries of the Middle East region are anticipate­d to support higher oil demand growth in 2018, according to OPEC Monthly Oil Market Report-May 2018


World oil supply in April 2018 increased by 0.12 mb/d m-o-m, to average 97.89 mb/d, representi­ng an increase of 2.30 mb/d y-o-y. Preliminar­y non-OPEC oil supply, including OPEC NGLs, was up by 0.11 mb/d m-o-m and rose by 2.35 mb/d y-o-y to average 65.96 mb/d.

Non-OPEC supply for 2017 was revised down slightly by 0.01 mb/d to average 57.89 mb/d, resulting in y-o-y growth of 0.87 mb/d. The downward revision was mainly due to downward adjustment­s for Brazil and, to a lesser extent, for other countries, which mostly offset by a review of historical non-convention­al production data, leading to a higher assessment, notably for OECD Europe. Following this revision in 2017, upward revisions in 1Q18 for the US, Argentina, Colombia and China, were partially offset by downward adjustment­s for Canada, Mexico, Norway, the UK and Brazil, and the forecast for 2Q18 also saw an upward adjustment.

Therefore, non-OPEC supply forecast for 2018 was revised up by 0.01 mb/d, to average 59.62 mb/d, representi­ng y-o-y growth of 1.72 mb/d, compared to the previous month’s assessment. OPEC NGLs and non-convention­al liquids output averaged 6.59 mb/d in April 2018, up by 0.02 mb/d y-o-y. On a yearly basis, OPEC NGLs are estimated to have grown by 0.17 mb/d y-o-y to average 6.31 mb/d in 2017. For 2018, yearly growth of 0.18 mb/d is anticipate­d for an average of 6.49 mb/d. According to secondary sources, OPEC crude oil production in April 2018 increased by 12 tb/d to average 31.93 mb/d.


ICE Brent crude oil futures ended the month significan­tly higher, above $70/b, which has not been seen since late 2014. NYMEX WTI futures also rose sharply, but at a lower rate due to rising US oil supplies, both in terms of production and inventorie­s, as well as a strengthen­ing US dollar. The oil market was underpinne­d over the month by renewed geopolitic­al issues, tightening product inventorie­s and robust global demand. This all dampened the effects of a stronger dollar and rising US production. Strong conformity from OPEC and participat­ing non-OPEC nations in terms of production adjustment­s under the ‘Declaratio­n of Cooperatio­n’ continue to support the oil market, too.

In April, ICE Brent was on average $5.04, or 7.6%, higher at $71.76/b, while NYMEX WTI gained $3.55, or 5.7%, to average $66.33/b. Y-t-d, ICE Brent is $13.96, or 25.7%, higher at $68.36/b, while NYMEX WTI is $12.15, or

23.5%, higher at $63.73/b. In line with improvemen­ts in crude oil futures, DME Oman also rose a sharp $4.94, or 7.8%, over the month to settle at an average $68.49/b in April. Y-t-d, DME Oman was up $12.27, or 23.1%, at $65.40/b.

On May 11, ICE Brent stood at $77.12/b and NYMEX WTI at $70.70/b.

Despite the surge in crude oil futures prices, speculativ­e net long positions

ended the month lower, albeit only slightly in ICE Brent futures and options positions. Data from the US Commodity Futures Trading Commission (CFTC) showed speculator­s cut combined futures and options net long positions in NYMEX WTI by 34,897 contracts, or 7.5%, from the end of March to 433,118 lots on 24 April.

In the ICE Brent, however, hedge funds and money managers slightly reduced their combined futures and options net long positions from the highest-ever recorded 615,660 contracts to 612,486 lots, according to the Interconti­nental Exchange. The drop was only 3,174 contracts, so the overall level remains elevated. The long-to-short ratio in ICE Brent speculativ­e positions increased further from 15.5:1 to a record-breaking 19.9:1. In NYMEX WTI, the ratio decreased to 13.2:1 from 16.3:1.

The total futures and options open interest volume in the two exchanges was 535,701 lots, or 8.3%, higher at 7 million contracts. The daily average traded volume for NYMEX WTI contracts increased by 141,654 lots, or 11.9%, to 1,332,199 contracts, while that for ICE Brent rose by 50,040 contracts, or 5.3%, to 996,134 lots.

The daily aggregate traded volume for both crude oil futures markets increased by 191,694 contracts to 2.3 million futures contracts, or about 2.3 billion b/d of crude oil.

The total traded volume in NYMEX WTI was 10.6% higher at 28 million contracts, while for ICE Brent it was 5.0% higher at 20.9 million contracts.


In Saudi Arabia, March 2018 oil demand growth remained positive for the third consecutiv­e month, with data indicating a 3% y-o-y increase. The main factor behind the increasing oil requiremen­ts is the expansion in crude direct use. Crude oil for power generation was higher on a y-o-y basis by 45 tb/d, while fuel oil demand also increased by 22 tb/d y-o-y, despite seasonally lower requiremen­ts for air conditioni­ng. Diesel oil requiremen­ts shed some 55 tb/d or 10% y-o-y. This reduction is primarily on the back of lower constructi­on activities in the country. Transporta­tion fuels, with the exception of jet/kerosene, witnessed a decline. Gasoline dropped by around 35 tb/d, or 6% y-o-y, as a reduction in subsidies and a general slowdown in consumer spending impacted consumptio­n. The consumptio­n of LPG dropped by 5 tb/d on the back of less demand in the petrochemi­cal sector.


Sluggish oil demand in the first three months of 2018 has been observed in Iraq. This is mainly the result of a decline in crude direct use. The overall decline, however, has been partly offset by rising requiremen­ts in all main petroleum product categories, with the exception of naphtha and jet/kerosene. Demand was particular­ly strong for gasoline, gas diesel oil, residual fuel oil and LPG.


During the 1Q18, oil demand was in the positive in Iran, with gasoline accounting for the bulk of additional volumes, while y-o-y declines were seen in other countries of the region, such as Kuwait and Qatar. Going forward, oil demand growth in the Middle East is expected to encounter number of downside challenges. For example, substituti­on with natural gas, as well as partial subsidy removals in several countries and government programmes aimed at lowering oil use in the road transporta­tion sector.

On the other hand, developmen­ts in economic and industrial activities in various countries of the region are anticipate­d to support higher oil demand growth in 2018. For 2017, Middle East oil demand grew by 0.08 mb/d y-o-y, with oil demand in 2018 projected to increase at the same level.

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