Oil and Gas


Improvemen­t in the oil price environmen­t should translate into positive overall economic activities, thereby lending some support to oil demand in 2018, according to OPEC Monthly Oil Market Report-June 2018



World oil supply in May 2018 increased by 0.27 mb/d m-o-m, to average 97.86 mb/d, representi­ng an increase of 1.74 mb/d y-o-y. Preliminar­y non-OPEC oil supply in May, including OPEC NGLs, was up by 0.23 mb/d m-o-m and rose by 2.09 mb/d y-o-y to average 65.99 mb/d.

For 2017, non-OPEC supply was revised up slightly by 0.01 mb/d from last month’s assessment due to rounding, representi­ng growth of 0.88 mb/d y-o-y. For 2018, total non-OPEC supply was revised up by 0.13 mb/d, to 59.75 mb/d, representi­ng y-o-y growth of 1.86 mb/d. This came on the back of upward revisions of 80 tb/d in 1Q18 historical production data in the OECD, particular­ly in the US and Canada, and upward adjustment­s in 2Q18 in the OECD (+79 tb/d), FSU (+215 tb/d) and China (+81 tb/d) due to higher-than-expected output, mostly in April and also in May by 234 tb/d. Neverthele­ss, total upward revisions for the month were offset by downward revisions in 1Q18 as well as 2Q18 by -44 tb/d and -136 tb/d, respective­ly.

OPEC NGLs and non-convention­al liquids’ production averaged 6.34 mb/d in May, remaining unchanged m-o-m. OPEC NGLs in 2017, based on OPEC Member Countries’ production data given through direct communicat­ion, were revised down by 0.07 mb/d and now are estimated to grow by 0.09 mb/d to average

6.23 mb/d; for 2018, production is forecast to grow by 0.12 mb/d to average 6.35 mb/d, which indicates a downward revision of 0.06 mb/d. According to secondary sources, OPEC crude oil production increased by 35 tb/d to average 31.87 mb/d in May 2018.


Crude oil futures swelled to their highest value since late 2014, with ICE Brent ending the month significan­tly higher above the $75/b level. NYMEX WTI also increased sharply, albeit at a slower pace than Brent, due to higher US oil production and inventorie­s, as well as a strengthen­ing US dollar (USD). The oil

market was again underpinne­d over the month by fears of potential disruption to oil flows due to escalating geopolitic­al tensions, concerns about Venezuela’s crude production slipping further and with bullish drawdowns in US crude inventorie­s.

Crude oil futures surged to their highest values in almost four years early in the month, amid geopolitic­al tensions. Strong conformity from OPEC and participat­ing non-OPEC producing countries in terms of the production adjustment­s through the ‘Declaratio­n of Cooperatio­n’ also continued to support the oil market. By the end of the month, crude oil futures drifted lower, on expectatio­ns of some supply volumes returning to the market, as well as a surprising­ly bearish read on weekly US oil stock numbers.

ICE Brent was $5.24, or 7.3%, higher to

average $77.01/b in May. NYMEX WTI also gained $3.66, or 5.5%, to average $69.98/b. Y-t-d, ICE Brent was $16.47, or 30.6%, higher at $70.22/b, while NYMEX WTI rose by $14.12, or 27.7%, to $65.09/b, compared with the same period in 2017.

In line with the improvemen­ts in crude oil futures, DME Oman also rose by a sharp $6.12, or 8.9%, to settle at $74.60/b in May. Y-t-d, DME Oman was up $14.81, or 28.2%, to stand at $67.35/b, compared with the same period in 2017.

In June, crude oil futures prices slipped in the second week. On 11 June, ICE Brent stood at $76.46/b and NYMEX WTI at $66.10/b.


In Saudi Arabia, the first four months of 2018 saw a more than 5% y-o-y decline in oil requiremen­ts. April was extremely sluggish, with the highest drop ever recorded. Oil requiremen­ts weakened by as much as 0.42 mb/d, which translates to more than 17%, y-o-y.

All product categories have shown a decline. Most of the weakness occurred in the heavy part of the barrel including the ‘other products’ category. Diesel oil continued its downward trend which started in 1Q16 as government infrastruc­ture projects showed signs of slowing down. Cement deliveries dropped by more than 9% y-o-y, an indication of slower constructi­on activities in the country. Diesel oil requiremen­ts dropped by 73 tb/d, or 12%, y-o-y. Total diesel oil demand is now at 0.58 mb/d, substantia­lly lower than the record levels in September 2015 of around 1 mb/d. For the heavy fuels, the main factors behind the drop in crude for direct use as well as fuel oil demand growth are the mild weather conditions, indication­s of slow requiremen­ts from the power sector due to higher electricit­y tariffs and substituti­on programmes from fuel oil and direct crude for burning to natural gas. Transporta­tion fuels in general also declined with gasoline and jet/kerosene both dropping by around 7% y-o-y each. Reduction of subsidies, general slowdown in consumer spending and higher inflation rates are cumulative­ly having a negative influence on the products’ performanc­e.


In Iraq, rising oil demand in the first four months of 2018 has been observed with a mixed performanc­e among product categories. This trend was supported further by April oil demand growth data which indicates an increase of around 95 tb/d, or 15% y-o-y, marking the highest gains thus far in 2018. Most of the main petroleum product categories registered positive growth with the exceptions of naphtha, jet/kerosene and the ‘other products’ category. Gains were witnessed in fuel oil demand mainly to satisfy the power generation sector, with total fuel oil consumptio­n reaching 0.28 mb/d.


Other countries in the region experience­d positive growth, with the UAE and Kuwait adding around 10 tb/d each, while oil demand in IR Iran weakened by around 30 tb/d during the month of April. Middle East oil demand growth is foreseen tilted slightly to the downside in 2018, mainly as a result of geopolitic­al concerns, substituti­on programmes towards other fuels as well as subsidy reduction policies. On the other hand, the improvemen­t in the oil price environmen­t should translate into positive overall economic activities, thereby lending some support to oil demand in 2018. Transporta­tion fuels, mainly gasoline and diesel oil, are anticipate­d to be the products leading oil demand growth.

Middle East oil demand increased by 0.08 mb/d y-o-y in 2017. Oil demand in 2018 is projected to increase by 0.06 mb/d y-o-y.

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