SUSTAINABLE GROWTH
Middle East oil demand growth is foreseen to be balanced for the remainder of 2019, with some negative uncertainties, including geopolitical concerns, substitution programmes with other fuels, as well as subsidy reduction policies. Improvements in the oil price environment should translate to a positive overall outcome for economic activities, hence lending some kind of support to oil demand in 2019, according to OPEC Monthly Oil Market Report-June 2019
WORLD OIL SUPPLY
Non-OPEC oil supply in 2019 is expected to grow at a pace of 2.14 mb/d, y-o-y, following a robust increase of 2.91 mb/d in 2018. The 2019 non-OPEC supply assessment is unchanged from last month, despite some downward revisions for the US, due to lower-than-expected output in 1Q19, and for Norway and Brazil due to lower-than-expected production in 3Q19 and 4Q19. These revisions are offset by upward revisions to China, and the UK. The US is projected to remain the main driver for non-OPEC supply growth in 2019 adding 1.83 mb/d y-o-y, followed by Brazil, Russia, China, Australia and the UK.
At the same time Mexico, Norway, Kazakhstan, Indonesia and Vietnam are projected to see the largest declines.
OPEC NGLs and non-conventional liquids y-o-y are expected to grow by 0.08 mb/d to average 4.84 mb/d in 2019, following growth of 0.13 mb/d in 2018. In May 2019, OPEC crude oil production is estimated to have decreased by 236 tb/d, m-o-m to average 29.88 mb/d, according to secondary sources.
CRUDE OIL PRICE MOVEMENTS
On a monthly average, the OPEC Reference Basket (ORB) eased in May despite several planned and unplanned supply outages. The Brent and Dubai price spreads, first-to-third month, widened further, mirroring a tightening physical market and concerns about the supply outlook.
On a monthly average, the ORB value decreased m-o-m by 81¢, or 1.1%, to settle at $69.97/b in May. Apart from Angolan Girasol, Venezuelan Merey and Algerian Saharan Blend, all ORB component values decreased alongside their perspective crude oil benchmarks, while firm official selling prices and crude oil differentials limited losses.
Crude oil futures prices ended May at their lowest levels since February, with ICE Brent falling by more than $7, or about 12%, during the month, and NYMEX WTI posted about a $10, or 19% slide. Oil prices registered higher volatility, particularly in late May, fuelled by uncertainty about the world economy and the impact on global oil demand.
Oil futures declined severely on signs of slowing economic growth and growing concerns about the global economic and oil demand outlook amid intensifying trade tensions between the US and China. In May, ICE Brent declined on average $1.33, or 1.9%, m-o-m to $70.30/b, while NYMEX WTI fell m-o-m by $3.01, or 4.7%, to average $60.87/b. On an annual average,
ICE Brent was $3.47, or 4.9%, y-o-y lower at $66.75/b, while NYMEX WTI declined by $7.11, or 10.9%, y-o-y to $57.97/b. DME Oman crude oil futures also declined m-o-m by $1.35 in May, or 1.9% over the previous month, to settle at $69.85/b. On a yearly average, DME Oman was down by 83¢, or 1.2%, y-o-y at $66.52/b.
Hedge funds and other money managers saw their bullish positions decline in May, after posting four consecutive months of increases.
Speculators liquidated long positions over the month, particularly for the US crude NYMEX WTI, and raised their bearish short positions on the basis of concerns about the world economy, the global oil demand outlook, escalating trade tensions and rising US crude oil stocks.