OPEC's view of world oil markets - 10 key takeaways
In their June Monthly Market Report, OPEC predicts the oil market will rebalance by year end. Among the key highlights:
1. OPEC's Reference Basket price averaged US$43.21/bbl in May, versus US$47.65 for Brent and a $46.80/bbl for WTI. In contrast, Western Canadian Select averaged US$34.60/bbl in May.
2. Improved pipeline and rail infrastructure in North America, coupled with a lifting of the US oil export ban, is reducing the Brent-WTI spread. The cheaper Brent is making it more cost effective for refineries on the East Coast to buy Brent versus purchasing domestic crude, since tanker transport is much cheaper than pipeline tolls or crude-by-rail.
3. Global demand growth will continue to come from China and India, offsetting declines in Russia and Brazil.
4. World oil demand for 2016 is expected to grow 1.2 million bbl/day, to an average of 94.18 million bbl/day. OPEC's demand forecast is unchanged from the previous month.
5. Global oil supply decreased by 0.73 million bbl/day in May to average 94.51 million bbl/day.
6. Non-OPEC production will shrink by 740,000 bbl/day thanks to outages in Canada, Brazil and Columbia.
7. OPEC production in May fell to 32.36 million bbl/day, down 100,000 bbl/day from the previous month. Production declines in Nigeria, Venezuela and Iraq were offset by gains in Kuwait, Iran and Saudi Arabia. Outages in Nigeria were offset by the loss of refining capacity in France, keeping a lid on Brent prices.
8. Canadian oil production is expected to average 4.48 million bbl/day, revised lower by 25,000 bbl/day due to the Alberta wildfires.
9. OECD oil stockpiles continue to rise, reaching 3.06 billion barrels in April 2016.
10. World oil markets were oversupplied by 2.59 million bbl/day in May, up from an average of 2.17 million in 2015. Rising demand will bring the markets into balance later in the year.
OPEC's next edition of the Monthly Market Report is expected to be released on July 12.