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
❏ The OPEC Reference Basket surged $11.38/b or almost 20% to average $68.36/b in June, the highest monthly average since October. Considerable optimism over prospects for the world economy, US dollar fluctuations and rising equity markets helped the Basket firm to over $70/b, as the market moved further into the driving season.

However, weak demand and continuing builds in refined products capped the bullish sentiment. In July, the Basket lost more ground as deepening unemployment rates reversed some of the more hopeful sentiments in the market. The Basket moved lower to stand at 59.66/b on 13 July.

❏ Following a 1.4% contraction this year, the world economy is expected to rebound in 2010 with growth of 2.3%. The OECD is forecast to grow at 0.7%, up from -3.9% this year. The US is expected to grow at 1.2% compared to a decline of 2.7% in 2009 and Japan is seen growing at 0.9% from a contraction of 6.4% this year.

The main concern in the OECD continues to be the Euro-zone, which is expected to decline a further 0.4% after this year’s contraction of 4.6%. Despite some encouraging signs in the OECD, many uncertainties prevail as unemployment is expected to grow further and consumer sentiment remains restrained. Developing Asia continues to be the main source of growth, particularly China (7.5%) and India (6.5%). The continuity and the effectiveness of government stimulus efforts will be crucial for economic growth expectations in 2009 and 2010.

❏ World oil demand is expected to turn positive in 2010. After two consecutive years of negative growth, global demand next year is projected to show a moderate increase of 0.5 mb/d. Non-OECD countries are seen making up the bulk of the increase, growing by 0.8 mb/d. China is projected to increase by 0.3 mb/d, up from only minor growth this year.

The OECD region is forecast to see a continued contraction of 0.3 mb/d, following a decline of 1.8 mb/d this year. The US consumption is expected to rebound by 0.2 mb/d after a sharp decline of 0.7 mb/d this year. The pace of the global economic recovery continues to be the main risk for the outlook for next year. For the current year, the world oil demand growth forecast remains unchanged at -1.6 mb/d.

❏ Non-OPEC supply is forecast to increase by 0.3 mb/d in 2010 to reach 50.9 mb/d. Brazil, USA, Azerbaijan, Kazakhstan, Canada, China, and India are seen to be the main contributors to next year’s growth. Mexico, UK, Norway, and Russia are expected to experience the largest declines.

OPEC NGLs and non-conventional oils are projected to reach 5.3 mb/d in 2010, indicating a significant increase of around 0.5 mb/d over the current year. In 2009, non-OPEC supply is estimated to increase by 0.2 mb/d, representing a minor upward revision from the last assessment. In June, OPEC crude production averaged 28.4 mb/d, up 39 tb/d from the previous month.

❏ The gasoline stock build in the US along with higher refinery runs in the Atlantic Basin have dampened sentiment in the product markets, exerting pressure on refining margins, especially in the US. The continuation of these circumstances amid uncertainty about gasoline demand over the driving season and unseasonably high stocks for middle distillates could deepen the current bearish trend. This might encourage refiners to move up maintenance schedules, which would negatively impact crude oil fundamentals.

❏ OPEC spot fixtures increased in June by 8% compared to the previous month. Freight rates in the crude oil tanker market increased in June by 32% compared to May with the VLCC sector showing the highest monthly gain. Storing at sea continued to lose momentum in June with the narrowing of the contango structure in the crude oil futures market. Clean spot freight rates declined by 7% on average with a much weaker market to the West of Suez.

❏ US commercial oil inventories increased a further 11 mb in June, the ninth build in a row to hit nearly 1,113 mb. This implies an overhang of nearly 100 mb with crude oil accounting for just 25%, compared to 70% in January. Crude oil inventories fell 16 mb to stand below 350 mb for the first time so far this year, while product inventories rose a massive 27 mb in June. In Europe (EU-15 plus Norway), record-high distillate stocks pushed total commercial oil stocks to move above the upperend of the five-year range.

❏ The demand of OPEC crude in 2009 is estimated to average 28.5 mb/d, a decline of 2.3 mb/d from the previous year. In 2010, the demand for OPEC crude is expected to average 28.1 mb/d, representing a drop of 0.4 mb/d from the current year.

Oil Price Per Barrel

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Feature Article:
Oil market outlook for 2010
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

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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.

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