The OPEC Monthly Oil Market Report covers major issues affecting the world oil market and provides an outlook for crude oil market developments for the coming year. The report provides a detailed analysis of key developments impacting oil market trends in world oil demand, supply as well as the oil market balance.

Oil Market Highlights:

❏ US dollar weakness against major currencies inspired increased investment in the commodities market, particularly for crude, pushing prices to record levels. Concern that economic growth could dent oil demand kept prices volatile. Geopolitical tensions in the Middle East added to market bullishness while weak economic indicators revived fears over a recession in the US, capping further price developments. The Basket averaged the month at $99.03/b for an increase of $8.39 or more than 9% from the previous month. The Basket rose in the first half of April, reaching a record high of $104.02/b on 14 April.

❏ Based on the newly updated purchasing power parity weights, world economic growth is forecast at 3.9% in 2008, representing a decline of 0.1% from the adjusted figures for the previous month. The US appears very likely to have fallen into recession in the first half of the year due to continued weakness in labour markets.

Payrolls have declined for the third month, consumer confidence has fallen sharply and the contraction continues in the housing sector. While existing home sales are showing some signs of bottoming, new home sales fell in February to the lowest level in 13 years. Mortgage-related asset writedowns and losses reported by the world’s biggest financial institutions now exceed $230 bn. Total losses from the US mortgage crisis are expected to approach one trillion dollars, according to the IMF.

Growth in the US has been revised down 0.2 percentage points to 1.1%, the Euro-zone 0.1 percentage points to 1.7% while Japanese growth is also down 0.1 percentage points to 1.3%. Chinese growth has been revised by 0.2 percentage points to 9.7% for 2008, while in India and Russia are forecast unchanged at 8.0% and 6.8%, respectively.

❏ Winter products did not see strong consumption growth in OECD due to the mild winter in the first quarter 2008. World oil demand has been showing healthy growth because of non-OECD demand. In the OECD and especially the US, transport fuel failed to grow as expected as a result of slow economic activities and higher oil prices. Growth in the Other OECD regions was not enough to offset the strong y-o-y decline in US oil demand in March.

World oil demand is forecast to grow by 1.2 mb/d in 2008 to average 87.0 mb/d, broadly unchanged from last month. Non-OECD oil demand — mainly from China, the Middle East, India and Latin America — is forecast to be strong, which is estimated to offset the weak OECD oil demand this year. In line with the typically low seasonality, total world oil demand in the second quarter is forecast to grow by only 1.0 mb/d y-o-y, with the  total increase expected to come from non-OECD countries.

❏ Non-OPEC supply growth in 2007 is estimated at 0.6 mb/d over 2006 to 49.4 mb/d. Downward adjustments made to Yemen, Oman, Australia and South Africa were partially offset by upward revisions to the USA, UK, Malaysia, Russia and Turkmenistan. For 2008, non-OPEC supply growth is expected to average 0.8 mb/d to 50.3 mb/d. Some of the 2007 revisions have been extended into 2008. Downward revisions in the USA, Mexico, Norway, Australia, Vietnam, Brazil, Oman, Yemen and Russia were partially offset by upward adjustments to Canada, UK, Colombia and Turkmenistan.

Growth in OPEC NGLs and non-conventional oils for 2007 and 2008 was left unchanged at 0.34 mb/d and 0.54 mb/d respectively. In March, OPEC crude oil production averaged 32.0 mb/d, a decline of 141 tb/d from the previous month.

❏ Product stock-draws over the last few weeks along with refinery snags in the West and discretionary throughput cuts by refiners supported product markets. However, crude costs outstripped the gains in product prices undermining refinery margins in the Atlantic Basin. The current sentiment in the product market could strengthen further with the approach of the driving season, providing support for crude prices. However, due to the comfortable gasoline stock levels, particularly in the US, product developments are not expected to boost prices sharply or to assume leadership of the market. Similarly, the persistent mismatch between refinery outputs and middle distillate demand, may ease in the near future as refineries return from maintenance, resulting in a surge in throughputs level.

❏ OPEC spot fixtures decreased by 8% in March from the previous month to average just under 13 mb/d due to weaker booking to the East. OPEC sailings are estimated to have declined slightly to average 24.10 mb/d in March. Arrivals dropped across the globe with US arrivals falling a minor 110,000 b/d in March. The VLCC market improved slightly supported by West of Suez rates. On the Middle East/eastbound route, VLCC rates declined due to Asian refinery cuts while rates to Western destinations increased in March. Clean tanker freight rates were relatively steady despite the gasoline arbitrage to the US.

❏ US commercial oil stocks fell 7.2 mb in March to stand at 970 mb, which corresponds to 18 mb above the five year average. The decline was attributed to distillates and gasoline while crude oil continued to increase for the third consecutive month. Despite the draw, US commercial oil stocks witnessed a contra-seasonal build in the first quarter of this year, compared to a year ago when they fell 43 mb. In EU-16 (Eur-15 plus Norway), total oil stocks rose 9.4 mb in March, offsetting an equivalent draw in the previous month to remain comfortable.

Similarly, EU-16 inventories witnessed a contra-seasonal build of 14 mb during the first quarter against a decline of 22 mb a year earlier. In contrast, Japan’s commercial stocks continued to fall with crude oil stocks hitting an all time-low in February. Preliminary data for March show that stocks fell again, but only slightly, with crude oil losing more than 1 mb.

❏ The demand for OPEC crude in 2007 is estimated to average 31.9 mb/d, an increase of 0.3 mb/d over the previous year. In 2008, the demand for OPEC crude is expected to average 31.8 mb/d, a decline of about 0.2 mb/d.

Download OPEC Monthly Oil Market Report, April 2008

PDF format, 1.03MB, 57 Pages.

Feature Article:
Recent crude oil price volatility

Oil market highlights
Feature article
Crude oil price movements
The oil futures market
Commodity markets
Highlights of the world economy
World oil demand
World oil supply
Product markets and refinery operations
The tanker market
Oil trade
Stock movements
Balance of supply and demand

Visit Organization of the Petroleum Exporting Countries (OPEC) Website

OPEC's mission is to coordinate and unify the petroleum policies of Member Countries and ensure the stabilization of oil markets in order to secure an efficient, economic and regular supply of petroleum to consumers, a steady income to producers and a fair return on capital to those investing in the petroleum industry.

OPEC is a permanent, intergovernmental organization, established in Baghdad, Iraq, 10–14 September 1960. The Organization now comprises 12 Members: Algeria, Angola, Indonesia, Islamic Republic of Iran, Iraq, Kuwait, Socialist People’s Libyan Arab Jamahiriya, Nigeria, Qatar, Saudi Arabia, United Arab Emirates and Venezuela.

The Organization has its headquarters in Vienna, Austria. Its objective is to co-ordinate and unify petroleum policies among Member Countries, in order to secure a steady income to the producing countries; an efficient, economic and regular supply of petroleum to consuming nations; and a fair return on capital to those investing in the petroleum industry.

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