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:

❏ Despite increased OPEC production and higher exports, the OPEC Reference Basket reached a record high of $128.34/b in June, representing an increase of $8.94/b or 7.5%. The jump in prices was mainly due to an escalation in geopolitical tensions which has been exacerbated by financial market speculation. The continued US dollar fluctuations and supply concerns due to a storm threat in the Gulf of Mexico have also boosted prices. In the first week of July, the escalation of geopolitical tensions in the Mideast added another $10.13/b. The Basket averaged $139.81/b on 14 July.

❏ World economy in 2009 is forecast at 3.9%, slightly lower than the revised 4.0% estimate for 2008. The OECD region is forecast to grow at 1.8% versus 1.9% this year, while developing countries growth may fall to 5.6% from 5.9%, mainly due to slower Latin American growth. China is seen to achieve 9.2% growth, a drop of 0.7 % below 2008, while India’s growth is almost unchanged at 7.5%. Following slightly higher final figures for the first quarter and signs of a better-than- expected performance in the second, US growth in 2008 was revised up by 0.3 points to 1.5%.

However, the outlook for the second half of this year has worsened amidst weakening labour markets, falling consumer confidence and remerging systemic risks in the financial markets. Decelerating economic activity was already becoming noticeable in the Euro-zone in the second quarter, even in Germany, but the ECB was not deterred from raising interest rates to 4.25%. In Japan, fears of recession are rising and growth in the second quarter is expected to be negative. In many emerging economies, tighter monetary policies introduced to reign in rising inflation may dampen growth for the rest of the year and into 2009.

❏ World oil demand in 2009 is forecast to grow by 0.9 mb/d, which represents a decline of 0.1 mb/d from estimated growth in 2008. Oil demand in the non-OECD is expected at 1.2 mb/d, accounting for all of next year’s demand growth. The economic slowdown and high pump prices in OECD have been impacting oil demand and will continue to do so next year. Transport is expected to be the key growth sector in 2009.

For this year, world oil demand has been revised down by 0.1 mb/d to stand at 86.81 mb/d, representing growth of 1.0 mb/d. Consumption of petroleum products experienced further declines in OECD in the second quarter due to slower economic activity and higher oil prices, which have doubled since the initial forecast. Transport fuel demand in the OECD and particularly the US has showed a strong decline.

❏ Non-OPEC oil supply in 2009 is expected to grow by 0.9 mb/d to reach 51.0 mb/d. Brazil, USA, Russia, Azerbaijan, Kazakhstan, Canada, and Australia are expected to be the main contributors to next year’s growth. Mexico, UK, and Norway are expected to experience the largest declines. OPEC NGLs and non-conventional oils are expected to reach 5.5 mb/d in 2009, indicating a significant increase of around 0.7 mb/d over the current year.

In 2008, non-OPEC supply is expected to increase by 0.6 mb/d, which represents a downward revision of around 112 tb/d from the last assessment, primarily due to lower output from Brazil, Russia, and Mexico. In June, OPEC crude output averaged 32.3 mb/d, slightly higher than in the previous month.

❏ Slowing demand for gasoline particularly in the US, combined with an easing in the distillate markets and costly crude have exerted pressure on refining economics across the world. The continuation of these trends may encourage refiners to cut throughputs or begin seasonal maintenance earlier than usual, which would trim crude demand. This could lead to further crude stock-builds in the coming months, putting pressure on crude prices in the latter part of the year. These perceptions may change if supply disruptions occur either in OPEC or non-OPEC producers over the next months. The main wild card for the product market in the near future would be possible refinery outages due to a potential active hurricane season in the US Gulf Coast.

❏ OPEC spot fixtures increased by 10% in June from the previous month to average 14.5 mb/d as refineries returned from maintenance and extra Middle East barrels came onto the market. OPEC sailings are estimated to have increased to average 23.33 mb/d. Arrivals in the US rose last month as imports increased. The VLCC market remained steady as the extra barrels halted the decline. Clean tanker freight rates were robust in June with rates increasing on all reported routes.

❏ US total commercial oil stocks rose 6.6 mb to stand at 975 mb at end-June. Product stocks remained comfortable, particularly transport fuels, while crude oil inventories fell a further 9 mb. US commercial stocks increased by only 10 mb in the first half of this year, compared to a typical build of 28 mb during this time of year.

The slower build was primarily due to the decline in crude imports, resulting from lower non-OPEC sailings despite a strong increase in OPEC production over the same period. In contrast, EU-15 plus Norway total oil inventories fell 8.6 mb but stayed within the upper end of the five-year range. Japan’s commercial oil stocks continued their upward trend in May, adding over 9 mb to move above 178 mb for the first time since last October. The build was attributed to crude oil which jumped 8 mb.

❏ The demand for OPEC crude in 2008 is estimated to average 32.0 mb/d, a decline of 90 tb/d over the previous year. In 2009, the demand for OPEC crude is expected to average 31.2 mb/d or 710 tb/d lower than in the previous year.

Download OPEC Monthly Oil Market Report, July 2008

PDF format, 993KB, 62Pages.

Feature Article:
Consensus points to easing fundamentals in 2009

Oil market highlights
Feature article
Statements and press releases
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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