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Thursday, November 15, 2018

OPEC crude supply drop of 555,000 bbls/day in November almost balanced out by higher OECD output

The Paris-based International Energy Agency (IEA) reports that total November oil supply fell by 50 thousand barrels per day (kbd) to 85.4 million barrels per day (mbd). OPEC (Organisation of the Petroleum Exporting Countries) reductions were almost counterbalanced by higher OECD (Organisation for Economic Co-operation and Development) supply.


OPEC crude supply fell 555 kbd in November to 28.9 mbd, on lower output from Saudi Arabia, the United Arab Emirates (UAE), Iran, Iraq and Venezuela. Effective spare capacity is 2.4 mbd, a figure which excludes disrupted Iraqi and Nigerian supply. OPEC-10 output of 27.1 mbd was 610 kbd below September levels, versus a proposed 1.2 mbd cut. The call on OPEC crude and stock change is 29.8 mbd for the fourth quarter 2006 (4Q06), but eases in 2007.


Non-OPEC annual supply estimates have been cut by 40 kbd in 2006 and by 115 kbd for 2007. Non-OPEC growth averages 650 kbd this year and 1.7 mbd next, with supply forecast to reach 52.6 mbd in 2007. North America, the Former Soviet Union (FSU), Brazil, Angola and Sudan will drive 2007 growth.


Global oil product demand remains unchanged at 84.5 mbd in 2006 (an increase of 1.1% compared to 2005) and 85.9 mbd in 2007 (an increase of 1.7% compared to 2005). The 2007 forecast faces downside risks, due to the uncertainties surrounding the U.S. economy. China's 2006 demand growth rate has been revised downwards to 5.6% given the apparent weak demand over the past three months.


OECD crude throughputs fell by 1.5 mbd to 38.3 mbd in October because of the seasonal peak of autumn maintenance cuts in refinery runs in all regions. Unplanned outages and previously unreported maintenance reduced the expected November rebound. December should see higher runs as refiners increase throughputs to meet peak heating-related demand.


Total OECD industry stocks fell by 40 mb in October, to 2,721 mb, some 33 mb higher than last year. The decline was centred on U.S. product stocks following strong demand and protracted refinery maintenance. Weekly data show that this trend continued in November. Forward demand cover fell to 54 days in October, one day less than in September but one day more than in the same period last year.


Tighter market fundamentals caused crude futures to rise above the recent USD 58-62/bbl range in late November. Lower OPEC crude output and falling U.S. product stocks outweighed unusually warm weather. Markets focused on the impact of potential further OPEC cuts arising from its 14 December meeting.


Contact: Erik Ranheim