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:

❏ Crude oil price developments saw two distinct patterns in December. After falling to a two-month low of $70.7/b in mid-December, the OPEC Reference Basket rebounded on the back of positive economic sentiment and colder weather in the Northern Hemisphere, which triggered a surge in speculative activity.

As a result, the Basket price averaged $74.01/b in December, the second highest monthly figure in 2009 after November. The Basket increased further in the New Year to hit $80.29/b on 7 January, the highest since early October 2008. Since then, prices have reversed on economic concerns, milder weather and inventory builds to stand at $75.79/b on 18 January.

❏ The world economy is expected to grow by 3.1% in 2010, revised up from the previous forecast of 2.9%. Most of the challenges for the OECD have not gone away entirely and the region is still dependent on government-led support. In the US, which is now forecast to grow by 1.9%, private consumption remains weak. Japan is expected to grow by only 1.1%, despite the recent stimulus package, while the Euro-zone forecast is now at 0.6%. China and India remain the bright spots for this year's recovery with an expected growth of 8.8% and 6.7% respectively, although concerns are emerging that these economies might be overheating.

❏ World oil demand declined by 1.4 mb/d in 2009. A cold winter, economic recovery and a low base for the previous year returned oil demand growth to positive territory by the end of the year. In 2010, world oil demand is forecast to grow by 0.8 mb/d. The decline in OECD consumption is expected to shrink as economic activity increases. Similarly, non-OECD countries are forecast to grow at a higher rate of 1.0 mb/d, compared with 0.5 mb/d in the previous year.

❏ Non-OPEC oil supply growth in 2009 is estimated at 0.5 mb/d, broadly unchanged from the previous assessment. In 2010, non-OPEC oil supply is expected to increase by 0.4 mb/d to average 51.3 mb/d in 2010, following an upward revision of 42 tb/d. The adjustment came partially from the US and Russia on the back of healthy production in the fourth quarter of 2009. In December, total OPEC crude production averaged 29.14 mb/d, the highest level in 2009, indicating an increase of 78 tb/d over the previous month.

❏ A cold snap across the globe along with increasing seasonal demand and product stock draws have underpinned product market sentiment and lifted crack spreads and refining margins, especially in the US and Europe. Should the cold weather persist, the overhang of middle distillate barrels would be partly mitigated, providing some relief to refiners in the coming weeks. However, the sustainability of recent developments in product markets and the positive impact on crude fundamentals and prices will largely depend on economic growth in the future.

❏ OPEC spot fixtures and sailings from OPEC increased by 6% and 1% respectively in December compared to the previous month. Freight rates in the crude oil tanker market increased on average by 12% in December with the VLCC sector increasing by 18%, Aframax by 23% and Suezmax declining by 5%. Volumes of both crude oil and petroleum products stored on tankers were almost steady by the end of December compared to a month earlier. Clean spot freight rates made a monthly gain of 30% in December and the market was equally firm on both sides of Suez.

❏ OECD commercial oil inventories rose 12.6 mb in November to stand around 93 mb above the five-year average. This represents 59.8 days of forward cover. Preliminary data for December shows a stock draw of 34 mb driven by the drop in US crude and products.

However, the surplus over the five-year average remains above 90 mb. US commercial oil inventories fell 39.1 mb with both crude and products declining by 10.4 mb and 28.7 mb respectively. Despite this draw, US commercial oil inventories remained 46 mb above the five-year average. European total oil inventories (EU plus Norway) rose 1.9 mb in December. A substantial build in products was partially offset by a draw in crude. European inventories now stand at 12.3 mb above the five-year average.

❏ The demand for OPEC crude in 2009 is estimated at 28.7 mb/d, around 0.1 mb/d higher than the previous report. This still represents a decline of around 2.3 mb/d compared to the previous year. In 2010, the demand from OPEC crude is expected to average 28.6 mb/d, broadly unchanged from the previous assessment and representing a decline of 0.1 mb/d from the previous year.

Oil Price Per Barrel

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Download OPEC Monthly Oil Market Report, January 2010

PDF format, 695KB, 70Pages.

Feature Article:
Fundamentals not behind recent market behaviour

Oil market highlights
Feature article
Crude oil price movements
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

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