Page 7 - MEOG Week 16

MEOG CommentaRy MEOG
of Cooperation has also been adjusted lower. Oil supply in 2020 is now forecast to show growth only in Norway, Brazil, Guyana and Australia. OPEC NGLs production in 2019 is estimated to have expanded by 0.04mn bpd to average 4.79mn bpd, and for 2020 will grow by 0.04mn bpd to average 4.83mn bpd. In March, OPEC crude oil production increased by 821 thousand bpd month on month to average
28.61mn bpd, according to secondary sources.
Products, refining and tankers
Global refining margins showed mixed perfor- mance during March, overall falling by around $20 per barrel. In the US, margins weakened as strength in gasoil/diesel was offset by losses in gasoline cracks, as complex margins came close to negative territory. In Europe, product markets strengthened slightly, supported by a fall in feed- stock prices, with most of the support coming from the gasoil segment.
An already relatively tight global gasoil mar- ket saw support from output cuts and continuing critical industrial activities for essential services and goods amid COVID-19. however, in Asia, margins eased towards the end of the month, pressured by a weaker top of the barrel, despite healthy gasoil and fuel oil crack spreads.
The tanker market has been one of few seg- ments of the oil industry to have enjoyed positive momentum in March.
A sudden surge in crude exports boosted demand for VLCCs, which pulled up Suezmax rates as well. Dirty spot freight rates declined mid-month before climbing again as the mar- ket was supported by high demand for tankers as charterers rushed to place cargoes amid a collapse in demand owing to the COVID-19 pandemic.
Increased options for time-chartering, including for floating storage, underscored the build-up of excess supply of crude and products in the market. For the month, dirty spot rates averaged 69% higher in March.
trade
The report notes how crude and product trade flows have been notably affected by the COVID- 19 pandemic and the uncertain outlook going forward, homing in on strong starts to the year in US exports, where the country was a net liquids exporter for the seventh consecutive month, and a decline in China’s crude imports from Decem- ber, averaging 10.5mn bpd over the first two months of 2020.
Official data showed India’s crude imports increasing slightly in February, although some estimates show a higher jump as the country took in some discounted cargoes diverted from China. India’s crude and product trade is likely to be broadly affected in March by a govern- ment-ordered lockdown.
Stock movements
OECD commercial oil stocks rose by 5.6mn bar- rels in February to stand at 2,945mn barrels.
This was 64.3mn barrels higher than the same time one year ago, and 24.7mn barrels above the latest five-year average.
Within components, crude stocks fell by 6.1mn barrels, while product stocks rose by 11.7mn barrels. In terms of days of forward cover, OECD commercial stocks rose by 5.0 days in February to stand at 72.7 days.
Preliminary data for March showed that US total commercial oil stocks increased by 8.2mn barrels, m/m, to stand at 1,922mn barrels. This was 31.8mn barrels, or 1.7%, above the same period a year ago, and 16.2mn barrels, or 0.8%, lower than the latest five-year average. Within components, crude stocks rose by 25.1mn bar- rels, while product stocks fell by 16.8mn barrels m/m.
supply and demand
Demand for OPEC crude in 2019 stood at 29.9mn bpd, 1.2mn bpd lower than the 2018 level. Following the recent agreement reached at the extraordinary OPEC and non-OPEC Min- isterial Meetings, the demand for OPEC crude in 2020 is anticipated to be 24.5mn bpd, around 5.4mn bpd lower than the 2019 level, though this remains heavily subject to uncertainty sur- rounding current market conditions.
The OPEC report does not come up with any surprises and largely echoes trends which have been apparent for a few weeks; however, the depth and rigour of the underlying analysis provide a very clear picture of the likely way that the oil price is going.
The IEA has also pointed out that although low prices might appear to be attractive to con- sumers, they are of little benefit to the approx- imately 4bn people living under some form of COVID-19 lockdown.
Also, low prices have an impact on the liveli- hood of millions of people employed along the oil industry’s extensive value chain, and they damage the economies of weaker producing countries where social stability is already fragile.
It is difficult to read this report with much optimism but solidarity shown by policy mak- ers from producing and consuming countries working together is the best hope of meeting this historic challenge and of bringing stability to the oil market.™
Week 16 22•April•2020 w w w . N E W S B A S E . c o m P7