Breaking down what the OPEC report says for oil

Breaking down what the OPEC report says for oil

OPEC released their monthly report which analyses data on crude oil price movements, world economy, world oil demand, world oil supply, product markets and refining operations, tanker market, crude and refined products trade, commercial stock movements and balance of supply and demand. The summary of these reports gives market investors and analysts data.

Crude Oil Price Movements

It was reported that Spot crude prices fell in April for the first time in six months, with North Sea Dated and WTI easing m-o-m by 1.7% and 1%, respectively.

Similarly, the OPEC Reference Basket price fell by 2% in April to settle at $63.24/barrel. Crude oil futures prices fell on both sides of the Atlantic, with the ICE Brent front month down 37 cents, or 0.6%, to average $65.33/barrel, and NYMEX WTI front month down by 65 cents, or 1.0%, to average $61.70/barrel.

It was also observed that the Brent-WTI spread widened in April to an average of $3.62/barrel. The backwardation structure of all three major oil futures benchmarks lessened across the month.

World Economy

More stimulus packages in the US and recovery in Asian economies are expected to continue supporting the global economic growth forecast for 2021, now revised up by 0.1 pp to reach 5.5% y-o-y.

However, the spread of COVID-19 variants and the speed of the global vaccine rollout would determine how far the recovery would go.

US economic growth in 2021 is now expected to reach 6.2%. Japan’s economic growth forecast is lowered to 3.0% for 2021. China’s economic growth forecast in 2021 could reach 8.5%.

Given the ongoing COVID-19 related challenges, India’s 2021 economic growth forecast is revised slightly down to 9.7%. Brazil’s growth forecast for 2021 remains at 3.0%. Russia’s economic growth forecast for 2021 stays at 3.0%.

World Oil Demand

For 2021, world oil demand is expected to increase by 6.0 mb/d, unchanged from last month’s estimate, to an average of 96.5 mb/d, slower than anticipated demand in OECD Americas during 1Q21. However, there is a spike of COVID-19 cases in India and Brazil, causing the 1H21 oil demand data to be revised downwards.

Notwithstanding, positive transportation fuel data from the US and acceleration in vaccination programmes in many regions provide further optimism in 2H21. The assumed return to some degree of normality and improved mobility is also expected to positively affect regions such as the Middle East and Other Asia in 2H21.

World Oil Supply

Non-OPEC liquids supply for 2021 is revised down by 0.2 mb/d from last month’s assessment and is forecasted to grow by 0.7 mb/d to average 63.6 mb/d. This is mainly due to the US liquids production outage of 2.2 mb/d seen in February, following the winter storms and freeze. Additionally, the supply forecast in Norway and Canada was also revised down, due to extensive seasonal maintenance.

The main drivers for supply growth in 2021 are anticipated to be Canada, Brazil, China, and Norway, while US liquid supply is expected to decline by 0.1 mb/d y-o-y. OPEC NGLs are forecasted to grow by around 0.1 mb/d year-on-year in 2021 to an average of 5.2 mb/d.

OPEC crude oil production in April increased m-o-m by 0.03 mb/d, to average 25.08 mb/d, according to secondary sources.

For more information about the report. Find attached the link here.

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