By Udeme Akpan
LAGOS—The Organisation of Petroleum Exporting Countries, OPEC, has predicted a significant increase in demand and by extension global oil market stability in 2018.
In a monthly report released, yesterday, OPEC disclosed that the world would need 32.42 million barrels per day (bpd) of its oil next year, up 220,000 bpd from the previous forecast.
It stated that physical oil markets in Europe and West Africa had firmed and that an increase in the price of Brent for immediate delivery compared to later supplies indicated the glut was easing.
The report indicated that world oil demand growth in 2017 is now expected at 1.37 mb/d, following an upward revision of 0.1 mb/d mainly to reflect better-than-expected data from OECD regions for 2Q17.
It disclosed that for 2018, global oil demand growth is projected to increase by 1.28 mb/d, slightly higher than last month’s projections, with total world consumption averaging 97.77 mb/d.
It stated that OECD will contribute positively to oil demand in 2018, adding some 0.21 mb/d, and non-OECD economies will make up the lion’s share with 1.07 mb/d.
“Non-OPEC oil supply growth in 2017 was revised down by 28 tb/d to stand at 0.78 mb/d, representing a total non-OPEC supply of 57.77 mb/d. Weaker-than-expected output in OECD America in 2Q17 was the main reason for the downward adjustment. For 2018, the non-OPEC oil supply growth forecast was also revised down by 42 tb/d to 1.10 mb/d to average 58.87 mb/d.
“The US, Brazil and Canada are expected to be the main drivers of growth, offsetting declines in Mexico, China, Columbia and elsewhere. OPEC NGL production is expected to grow by 0.18 mb/d to average 6.49 mb/d in 2018. In July, OPEC production increased by 173 tb/d to average 32.87 mb/d, according to secondary sources.
“Refinery margins in the Atlantic Basin saw mixed movements in July. US margins recorded solid gains as crack spreads for all products increased due to healthy domestic demand. In contrast, margins in Europe weakened in response to products oversupply, limited export opportunities and higher feedstock costs.
“Meanwhile, margins in Asia strengthened, supported by robust seasonal demand. Tanker Market Dirty tanker spot freight rates mostly experienced negative developments in July, or remained at the previously low levels. VLCC and Suezmax average spot freight rates stayed almost flat compared with the previous month, while Aframax rates dropped by 6% compared to a month earlier. Balance of supply and demand for OPEC crude in 2017 is estimated to stand at 32.4 mb/d, some 0.4 mb/d higher than the 2016 level. In 2018, demand for OPEC crude is forecast at 32.4 mb/d, at the same level as in 2017.
“World Economic Prospects World economic growth has gained momentum and its dynamic is reflecting general improvements across the globe. Global growth is forecast at 3.4% for both 2017 and 2018, compared to 3.0% in 2016. After increasing by only 1.7% in 2016, OECD GDP growth has improved and is expected at 2.0% in both 2017 and 2018.
“The major emerging economies are also holding up well at a high growth rate (India), performing better than expected (China) or are recovering from recession (Russia and Brazil). With the ongoing growth momentum and an expected continued dynamic in 2H17, there is still some room to the upside.
“At the same time, challenges remain and are mainly related to global political developments and upcoming monetary policy decisions in the US and the Euro-zone. A renewed increase in investments in the energy sector along with rising domestic consumption and improving exports are leading growth to 2.1% in 2017 and 2.2% in 2018.
“Growth in 2018 is forecast to rebound to 7.5%. Meanwhile, Brazil and Russia are forecast to rebound from a two-year’s recession to growth of 0.5% and 1.2% in 2017, respectively, supported by recovering commodity prices and an improving domestic consumer base.”