According to the IEA OIL market Report, Oil markets began the New Year confronting a host of supply issues, not least a pending EU ban on Iranian oil imports and retaliatory threats from Tehran to close the Strait of Hormuz, through which flows roughly one‐third of world oil exports. Oil prices jumped $4‐5/bbl on the reports, but eased on mounting euro zone debt issues. Brent was last trading near $112/bbl and WTI at $100.50/bbl.
Clear signs of economic weakness tipped global oil demand into a declining year‐on‐year trend at the end of 2011, down 0.3 mbd in 4Q11, its first such drop since the tail‐end of the credit crunch. The significantly lower starting point has accordingly trimmed global oil demand growth to 1.1 mbd for 2012 (from 1.3 mbd previously).
Non‐OPEC supply fell by 0.140 mbd to 53.2 mbd in December, as rising North Sea output only partially offset a seasonal decline in biofuels and lacklustre supply from the FSU. Middle East unrest and other unplanned outages limited annual growth in 2011 to only 0.045 mbd. A rebound to 0.340 mbd growth is expected for 1Q12, and 1.0 mbd for 2012 overall, as non‐OPEC output averages 53.7 mbd.
December OPEC crude output rose by 0.240 mbd to 30.89 mbd, the highest in more than three years, on a rapid recovery in supplies from Libya, and lesser increases from Saudi Arabia and the UAE. OPEC in December raised its output target to 30 mbd for 2012, close to OMR projections for the ‘call on OPEC crude and stock change’.
OECD industry oil inventories rose by 4.1 mb to 2 647 mb, or 57.5 days of forward cover, in November, led by North American and European gasoline. Stock levels nonetheless remained below the five year average for a fifth consecutive month. December preliminary data show a seasonal 23.6 mb draw in OECD industry stocks.
Global refinery crude runs are revised down by 250 kb/d and 170 kb/d for 4Q11 and 1Q12, to 74.8 mbd and 74.9 mbd, respectively. Weak economic growth and mild weather led to global demand contraction in 4Q11. A weakening economic outlook and recent refinery shutdowns in Europe curb early‐2012 activity levels.