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Oil Market Highlights - Feb 10
Source: OPEC_RP100201 2/10/2010, Location: Europe
Financials and Investment
- The OPEC Reference Basket continued its upward trend in early January to hit a 15-month high of
$80.29/b on the back of bullish sentiment, driven by cold weather. The trend was reversed after
temperatures rose in the Northern Hemisphere, combined with the stronger dollar and a downward
correction in equity markets. The Basket fell steadily to stand at $71.01/b on 29 January. Renewed
concerns about economic growth, particularly in Euro-zone, resulted in a further decline, pushing the
Basket below $70/b in early February to stand at $69.76/b on 9 February. On a monthly basis, the
Basket averaged $76.01/b in January, up $2 from December.
- The world economy continues to show some improvement and global GDP is now expected to
grow at an upwardly revised 3.4% in 2010 after contracting by 0.9% in 2009. The main contribution
for this growth is coming from developing Asia, with China seen growing by 9.1% in 2010, while
India is forecast to grow by 7.0% in 2010. The OECD in comparison is forecast to grow on a much
lower level of 1.7%. The US is now expected to contribute the most within the OECD at 2.5% in
2010. Growth in 2010 continues to be challenged by concerns about the level of public debt in
almost all OECD regions, still record high unemployment levels across the globe and government
efforts in China to prevent the economy from overheating.
- World oil demand growth in 2009 remained broadly unchanged from the previous report with a
contraction of 1.4 mb/d. For 2010, global demand is projected to grow by 0.8 mb/d, in line with the
previous forecast. The slower pace of recovery in US demand, despite positive economic signals, is
a key uncertainty for oil demand growth this year. Non-OECD regions will be the sole contributors to
global demand growth in 2010.
- Non-OPEC supply is expected to have increased by 0.6 mb/d in 2009, following a slight downward
revision, mainly due to changes to historical data and some adjustment to actual fourth quarter
production data. In 2010, non-OPEC oil supply is forecast to increase by 0.3 mb/d following a minor
downward adjustment. In January, total OPEC crude oil production averaged 29.19 mb/d, according
to secondary sources, representing an increase of 63 tb/d from the previous month.
- A cautious and smart operational approach by refiners coupled with higher seasonal demand has
led to an improvement in product market fundamentals in January. But mild weather in the latter
part of January has adversely affected the temporary bullishness sentiment and capped gains in
refining margins. The recent heavy snow in the US could trigger further bullish developments in the
product market, but it may not be able to provide sufficient support for both products and crude in the
short-term, as the market is suffering from sluggish demand growth. Refinery utilization rates
remained below seasonal levels, particularly in the Atlantic region.
- The bullishness of the tanker market continued in January and spot freight rates have increased on
all routes. The correction in rates was driven by changes to world scale flat rate as well as increased
activities. OPEC spot fixtures increased a further 1.2 mb/d in January to average 12.7 mb/d, which
corresponds to almost two-thirds of total spot fixtures. OPEC sailings fell a minor 0.1 mb to 22.9 mb,
according to preliminary estimates.
- US commercial oil inventories fell by 3.0 mb in January to 1,046 mb, but the drop was far below
the seasonal draw. This decline was driven by products which outpaced the build in crude oil
inventories. US commercial oil inventories are 32 mb above a year ago and 61 mb above the five
year average. In December, commercial oil inventories in Japan fell by 3.6 mb to total of 164.2 mb.
This represents around 25 mb below both a year earlier and the average for the last five years. This
draw is attributed to total products as crude inventories saw some gains. Preliminary indications
show that at end of January, Japan’s commercial oil inventories rose by 4.8 mb to The build was
split between crude and products.
- The demand for OPEC crude in 2009 is estimated at 28.8 mb/d around 130 tb/d higher than in the
previous report. This still represents a decline around 2.2 mb/d compared to 2008. In 2010, the
demand from OPEC crude is expected to average 28.8 mb/d, about 150 tb/d above the previous
assessment and almost unchanged from a year earlier.
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