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Monday, November 19, 2018

Stock draw for the 2nd quarter in a row

The International Energy Agency (IEA) reports that Preliminary OECD (Organisation for Economic Co-operation and Development) stock data continue to point to a 0.815 million barrels per day (mbd) draw on first-quarter total oil stocks, following on from a draw of similar magnitude in the previous quarter. Forward demand cover provided by total oil inventories remains around the five-year average, but gasoline stocks are low in all regions.


April world oil output rose by 0.055 mbd to 85.5 mbd, with OPEC supply levelling off near 30.3 mbd. Non-OPEC growth in 2007 is trimmed to 1.0 mbd, plus 0.2 mbd of OPEC NGLs, which leaves a 2.3 mbd rise in the ‘call on OPEC’ by 4Q - running well ahead of expected OPEC capacity additions. This implies lower spare capacity later in the year.


Global oil product demand is revised down marginally to 84.2 mbd in 2006 and 85.7 mbd in 2007 following adjustments to baseline historical data. Changes are centered in the Middle East, but Chinese demand has also been revised down, despite strong 1Q growth.


Nigerian crude capacity shut-ins rose to 0.815 mbd in early May, adding to the pressure caused by a gasoline market already tightened by an unusually high level of unplanned refinery outages. Unsurprisingly, gasoline remains the primary driver behind oil prices, with cracking and U.S. retail prices reaching levels not seen since the post-Hurricane Katrina spike in September 2005.


Seasonal refinery maintenance and a spate of unplanned outages is expected to depress global throughputs. This implies, with demand increasing in June, that there is likely to be a further tightening of product stocks. Refinery runs, and therefore crude demand, should rise sharply in July (2.5 mb/d over March) as refiners seek to meet peak summer demand.


Contact: Erik Ranheim