Recent Developments in Global Oil Inventories
Oil Market Highlights
Crude Oil Price Movements
The OPEC Reference Basket averaged $55.50/b in October, gaining $2.06 over the previous month and
reaching the highest value in more than two-and-a-half years, with a year-to-date average of $50.68/b. Crude
futures also reached levels not seen since mid-2015. ICE Brent ended $2.13 higher at $57.65/b, while
NYMEX WTI increased $1.72, reaching $51.59/b, keeping the Brent-WTI spread above $6/b. Prices have
been supported by rising global demand data and expectations that major producing nations will extend a
deal to adjust output and bring the oil market to a balance. Hedge funds raised net long positions in
NYMEX WTI and ICE Brent futures and options by 29,456 and 21,592 contracts, respectively, to
281,244 and 530,237 lots. Brent and Dubai remained in backwardation, while the WTI contango eased.
Sweet/sour differentials narrowed in Asia and Europe, but widened on the US Gulf Coast.
The global economic growth dynamic has continued its momentum, with the forecast for 2017 revised up to
3.7%, from 3.6% in last month’s report. Similarly, the 2018 forecast has been adjusted higher as well to
stand at 3.7%, compared to 3.5% in the previous month. Particularly OECD economic growth in 2017 was
better than expected so far. The OECD is seen growing by upwardly revised 2.3% in 2017 and 2.2% in 2018.
Good momentum – and a potential tax reform – in the US, the ongoing dynamic in the Euro-zone and to
some extent in Japan, solid growth in China and India and an improving situation in Russia and Brazil are
supporting the growth trend in the short-term.
World Oil Demand
World oil demand growth is expected to rise by 1.53 mb/d in 2017 after an upward adjustment of 74 tb/d to
account for the better-than-expected performance of China in 3Q17. In 2018, world oil demand is foreseen
reaching 1.51 mb/d, around 130 tb/d higher than in the previous assessment.
World Oil Supply
Non-OPEC oil supply is now projected to grow by 0.65 mb/d y-o-y in 2017, representing a downward revision
of 0.02 mb/d from last month’s report. For 2018, growth in non-OPEC oil supply has also been revised down
by 0.07 mb/d to stand at 0.87 mb/d. OPEC NGLs and non-conventional liquids are expected to grow by
0.18 mb/d in 2018, following an increase of 0.17 mb/d in 2017. In October 2017, OPEC crude oil production
decreased by 151 tb/d, according to secondary sources, to average 32.59 mb/d.
Product Markets and Refining Operations
Product markets in the Atlantic Basin weakened in October due to seasonally-lower gasoline demand
following the end of US driving season. Nonetheless, US refining margins have exhibited some improvement
y-o-y on the back of firm product demand and amid low stock levels. In Europe, solid middle-of-the-barrel
demand offset weakness at the top and bottom. Product markets in Asia also weakened slightly, but
remained at healthy levels, supported by the onset of refinery maintenance.
Sentiment in the dirty tanker market generally strengthened in October, as freight rates for different classes
showed improvements on most major trading routes. Average dirty tanker spot freight rates rose 16%
compared to the previous month, on the back of improved seasonal tonnage demand, as well as port and
weather delays, among other factors. Despite healthy gains in October, the shipping market remains in
surplus, capping further increases in spot freight rates. Meanwhile, clean tanker freight rates experienced a
relative decline, although remaining above the levels of the same month last year.
Total OECD commercial oil stocks fell in September to stand at 2,985 mb. At this level, OECD commercial oil
stocks are 154 mb above the latest five-year average. Crude and products stocks indicated a surplus of
around 129 mb and 25 mb, respectively, above the seasonal norm. In terms of days of forward cover,
OECD commercial stocks stood at 62.3 days in September, some 1.9 days higher than the latest five-year
Balance of Supply and Demand
Based on the current global oil supply/demand balance, OPEC crude in 2017 is estimated at 33.0 mb/d,
around 0.71 mb/d higher than in 2016. OPEC crude in 2018 is estimated at 33.4 mb/d, about 0.46 mb/d
higher than in 2017.