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 averaged $90.64/b in February, representing a gain of $2.29 or 2.59% over the previous month.

Prices were pushed higher by US dollar weakness, which encouraged the continued inflow of funds into the paper-oil market as investors sought to hedge against inflation and currency fluctuations. Revived geopolitical developments also pressured the market, although the upward trend was capped by builds in US crude oil and gasoline stocks. The Basket surged into the first week of March peaking above the $100/b level amid continued dollar depreciation and a late winter cold snap in North America. The OPEC Reference Basket price reached $102.39/b on 13 March.

❏ World economic growth is forecast at 4.6% in 2008, unchanged from the previous month despite slight downward revisions in some regions. In the US, fears of a recession in the first half of the year have been fanned by a bearish employment report and a drop in retail sales in February as well as falling consumer confidence in early March.

Mortgage-related asset write downs and losses reported by some of the world's biggest financial institutions now approach $190 bn. Recent surveys indicate that sentiment appears to be worsening, even outside the US. Separately, inflation picked up in China, with consumer prices increasing at an eleven-year high rate of 8.7% in February, raising expectations of a faster revaluation of the yuan as a means of curbing inflation and slowing economic growth. The forecast for China remains unchanged at 9.9% for 2008. Growth in the US has been revised down 0.3 pp to 1.3% while the Euro-zone remains unchanged at 1.8% with signs of resilience mainly coming from the Euro-zone's largest economy, Germany. Japanese growth is also unchanged at 1.2%.

❏ The weather is once again the main factor in OECD oil demand this winter; the warm winter not only reduced winter product consumption, but also triggered power plants to switch to cheaper natural gas. First-quarter OECD oil consumption is expected to be below earlier forecasts. However, the stronger-than-expected oil demand in non-OECD regions will to some degree offset the downward revision world-wide. World oil demand in 2008 is forecast to grow by 1.2 mb/d to average 87.0 mb/d, in line with last month's estimate. The slowing world economy and warm weather in some parts of the OECD regions dented the demand for winter products.

Fourth-quarter OECD demand growth was revised down by 0.2 mb/d which was offset by strong growth in Latin America and Africa. The world oil demand growth estimate for 2007 remains unchanged at 1.2 mb/d or 1.4%.

❏ Non-OPEC supply growth in 2007 is estimated at 0.6 mb/d, broadly unchanged from last month's assessment. Minor downward adjustments to Canada, Chad and Russia were almost totally offset by upward adjustments in the US, UK and Sudan. For 2008, non-OPEC supply growth is expected to average 0.9 mb/d representing a downward revision of 0.2 mb/d due to revisions to Canada, Mexico, Norway, UK, Brazil, Chad and Russia, which were partially offset by upward adjustments to Sudan, Other Western Europe and the USA. In February, total OPEC crude oil production averaged 32.1 mb/d, an increase of 82,500 b/d over the previous month. Production in Iraq witnessed significant gains.

❏ The product market sentiment improved slightly following a recent cold snap in the Atlantic Basin and lower refinery runs due to the seasonal maintenance schedule. Over the coming months, a combination of slowing demand for middle distillates, gasoline stock builds across the globe especially in the US, and high crude oil prices may limit the impact of seasonal refinery turnarounds on refining margins. However, the potential risk of refinery outages may change the current circumstances of the product market and support both product and crude prices.

❏ OPEC spot fixtures rose by 4% in February to average 14.9 mb/d, supported by increased fixtures to the East, while non-OPEC spot fixtures decreased by 9% to average 7.0 mb/d. OPEC sailings were broadly steady in February, dropping only 90,000 b/d from the previous month to stand at 23.3 mb/d. VLCC crude oil freight rates declined on all routes in February, dropping 17% on average on lower activities and ample availability. Suezmax rates decreased in February on the back of the bearish market. Product spot freight rates also declined due to limited activities and closed gasoline arbitrage to the US as well as lower refinery runs and margins.

❏ Preliminary data show that OECD total net oil imports increased 0.7 mb/d in January from the previous month on the back of higher net crude oil and product imports, supported by winter demand. US crude imports fell 400,000 b/d in February to average around 9.8 mb/d while US product imports decreased by 95,000 b/d on the back of lower refinery runs. In February, Japan's net oil imports declined 158,000 b/d, driven by lower crude imports in anticipation of the refinery maintenance season as well as weak margins. China's crude oil imports rose in January to average 3.3 mb/d while product imports rose 22%. India's net oil imports dropped 17% in January due to falls in crude oil and product imports, indicating y-o-y growth of 5%.

❏ US commercial oil stocks fell around 4 mb in February but remained at the same level as a year ago to display an overhang of 24 mb with the five-year average. The drop was driven by products, which despite the decline remained above the five-year average supported by gasoline stock builds which reached a 14-year high of 234 mb at the end of the month and increased further in early March. Crude oil stocks continued to rise to move above the five-year average.

In EU-15 plus Norway, total oil inventories offset the gain of the previous month but both crude oil and products were in line with the five-year average. However, Japan's commercial oil stocks remained stable in January while the deficit with the five-year average narrowed to just 3 mb whereas preliminary data show that inventories declined sharply in February.

❏ The demand for OPEC crude in 2007 is expected 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 31.7 mb/d, a decline of 0.2 mb/d.

Download OPEC Monthly Oil Market Report, March 2008

PDF format, 733KB, 58Pages.

Feature Article:
Recent oil market dualism
Oil market highlights
Feature article
Press release
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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