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 reached a record high in April, increasing $6.13 or almost 7% over the previous month to average $105.20/b. Prices rose on geopolitical developments in the Middle East and supply disruptions in West Africa and Europe.

The weakening US dollar and economic uncertainty added to market volatility, along with sharp downward revisions to demand forecasts which were offset by signs of healthy demand in China. The bullish momentum continued in May on geopolitical trends and strike-related disruptions. In May, the Basket rose to just under $120/b before declining to stand at $118.78/b on 14 May.

❏ World economic growth is forecast at 3.9% in 2008, unchanged from the previous month amid signs that the credit crisis may be easing. Forecasts for Japan were revised slightly up while those for the Euro-zone slightly down. The forecast for the US is unchanged at 1.1%. In the narrow technical sense, the US is not yet in recession -- advance figures for US GDP in the first quarter still indicate positive growth, albeit at a meager 0.6% yearly rate, mainly on continued strength in exports and a rise in inventories. US payrolls in April fell for the fourth month, but the loss of 20,000 jobs was much smaller than the average of 80,000/month in the first quarter of 2008. The PMI services index also surprised on the upside, rising above 50 for the first time in three months.

Overall, the better-than-expected data and signs that the Fed's easing cycle was at an end, helped lift the dollar from its lows versus the euro and yen. Inflation continued to trouble China, India and other emerging markets and could dampen growth in the months ahead.

❏ World oil demand in April grew mostly in the non-OECD regions as was expected. OECD oil demand was very weak, although winter product demand improved across Europe. US oil consumption declined sharply, due to both the slowing economy and warm winter weather. Oil demand growth is expected to experience the typical seasonal low consumption in the second quarter.

Moreover, this year's summer driving season is not likely to show its normal annual growth due to the anticipated weaker gasoline demand in the USA. World oil demand growth in 2008 is forecast at 1.2 mb/d y-o-y to average 86.95 mb/d, representing a slight downward revision from the previous month. Non-OECD countries --mainly China, the Middle East, India and Latin America --are expected to account for all of the demand growth. Demand in North America is forecast to be flat while oil demand in other OECD regions are expected to decline due to weakening transport fuel demand in the second quarter.

❏ Non-OPEC supply growth in 2008 is expected to average 0.7 mb/d, representing a slight downward revision from the previous month. Downward revisions made to Mexico, Norway, UK, Denmark, Australia, New Zealand, Brazil and Russia were partially offset by upward adjustments to India, Syria and Chad. Growth in OPEC NGLs and nonconventional oils for 2007 and 2008 now stand at 0.34 mb/d and 0.54 mb/d respectively.

In April, OPEC crude oil production averaged 31.70 mb/d, a decline of 393 tb/d from the previous month as production in Nigeria and Iraq witnessed disruptions.

❏ Gasoline stock-draws in the US along with the tight distillate markets in Europe and Asia supported the product market, lifting refining margins across the globe. The current sentiment of the product market may be compounded further, providing support for crude prices as the driving season approaches. However, due to relatively comfortable gasoline stocks, particularly in the US, refining margins are not expected to boost sharply over the next months. Meanwhile, with technical restrictions in the downstream hindering any significant switch in the refinery mode to favour middle distillate production, the current tightness in middle of the barrel components might persist, supporting the market over the coming months.

❏ OPEC spot fixtures increased 0.58 mb/d to average 13.5 mb/d in April. Middle East spot fixtures to the East increased as well as global fixtures on the back of improving tonnage demand, while Middle East to West fixtures declined. OPEC sailings remained steady in April with only a minor decline, although increased chartering activities at the end of the month, which pushed up spot freight rates, point to a possible rise in global sailings in the coming month. As a result of the growing tonnage demand, the tanker market for crude oil increased in April on all reported routes. VLCC spot freight rates rose 7% on average from the previous month, marking the highest level since January.

❏ US total commercial oil stocks rose a further 2.6 mb in April to 973 mb to remain slightly above the five-year average. Crude oil stocks rose for the fourth consecutive month, adding 7.4 mb to hit 325 mb, their highest level since last July, while product stocks fell for the third consecutive month. Despite a draw of 13.6 mb, gasoline stocks remained at the upper end of their seasonal range. In EU-16 (Eur-15 plus Norway), total oil stocks fell 2 mb to stand at 1,111 mb in April, remaining in line with the five-year average since the beginning of the year.

In March, Japan's commercial stocks recovered from a huge decline of February, rising for the first time since last October. Despite this recovery, stocks remained below the seasonal average, particularly crude oil inventories, which hit a new record low. Preliminary data for April indicate almost no change in stocks from the previous month.

❏ The demand for OPEC crude in 2007 is estimated to average 32.0 mb/d, an increase of 280 tb/d over the previous year. In 2008, the demand for OPEC crude is expected to average 31.8 mb/d, or 120 tb/d lower than in the previous year.

Download OPEC Monthly Oil Market Report, May 2008

PDF format, 702KB, 60 Pages.

Feature Article:
Lack of refinery flexibility impacting crude oil market
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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