MARKETS: WTI poised to top US$60 for the first time since December as OPEC raised global oil demand forecast again

(EnergyAsia, May 1 2015, Friday) — Crude prices are near five-month highs as sentiments continue to favour further upside in the near term. US WTI is poised to top US$60 a barrel for the first time since December while Brent is just over US$3 short of breaking the US$70 mark.

The world’s three leading energy agencies have set the tone for this year’s trade by steadily raising their monthly forecasts for global oil demand and chipping away at supply outlook for this and next year.

The Organisation of Petroleum Exporting Countries (OPEC), the International Energy Agency (IEA) and US Energy Information Administration (EIA) have been consistently raising their consumption forecasts to record highs with each passing month.

In its April report, OPEC said it expects global demand to grow by 1.28% this year to 92.45 million b/d, an upgrade from its forecasts of 92.36 million b/d and 92.32 million b/d the previous two months.

OPEC, generally the least bullish among the three agencies in forecasting oil demand, has left almost unchanged its expectation for non-OPEC production at 57.17 million b/d for 2015.

It is also holding onto its earlier calls for the world economy to grow by 3.4% this year, up slightly from 2014’s 3.3%.

Setting the stage for oil prices to stabilise in recent months, US shale-based and Canadian oilsands producers, the main drivers of global supply growth in recent years, have been forced to drastically cut back operations since oil prices started collapsing last June.

Given the continuing strength of global demand and economic growth, oil prices appear to have seen the worst of last year’s sell-off as more analysts emerge to challenge the theme that the supply overhang could push crude down to the US$20s.

“US tight oil and Canadian oil sands output are expected to see lower growth following the recent strong declines in rig counts,” said OPEC.

The approach of driving season in North America will add another layer of support to strong global demand for gasoline.

“Worldwide gasoline demand has been soaring in recent months,” said OPEC, noting that motorists in the developed economies have been taking advantage of lower pump prices.

“In the first quarter, gasoline demand in the US showed a sharp year-on-year increase of more than 250,000 b/d. This came despite the dampening effect that cold weather typically has on gasoline demand. The improvement was supported by a rise of almost 5% in vehicle miles travelled in January, encouraged by lower retail gasoline prices.”

Gasoline is also finding favour in Asia’s booming economies, which now boast the world’s fastest growing major markets for automobiles.

According to OPEC, China, India, Vietnam and Pakistan are seeing strong demand growth as the small but expanding middle class is adopting the American love for cars despite the removal of subsidies and implementation of new taxes on vehicle ownership and use.

Middle distillates demand has also been rising sharply, particularly again in China and India, said OPEC.

In the Atlantic Basin, new regulations have come into force establishing maritime Environment Control Areas (ECAs) that have led to marine gasoil replacing residual fuel oil as a shipping fuel.

April 2015

Table 1. World oil demand, million b/d

2013 2014 2015 2015/14 %

Americas 24.09 24.17 24.39 0.91

Europe 13.70 13.51 13.45 -0.44

OECD Asia 8.32 8.14 8.01 -1.60

Total OECD 46.10 45.82 45.85 0.07

Other Asia 11.06 11.27 11.53 2.30

China 10.07 10.46 10.77 2.96

Latin America 6.50 6.69 6.89 2.99

Middle East 7.81 8.06 8.30 2.98

Africa 3.67 3.78 3.87 2.38

FSU 4.49 4.54 4.58 0.88

Other Europe 0.64 0.65 0.67 3.08

Total world 90.33 91.28 92.45 1.28

Previous estimate 90.25 91.20 92.36 1.27

March 2015

Table 1. World oil demand, million b/d

2013 2014 2015 2015/14 %

Americas 24.09 24.19 24.39 0.83

Europe 13.64 13.45 13.36 -0.67

OECD Asia 8.33 8.14 8.02 -1.47

Total OECD 46.06 45.78 45.77 -0.02

Other Asia 11.06 11.28 11.53 2.22

China 10.07 10.46 10.77 2.96

Latin America 6.50 6.69 6.89 2.99

Middle East 7.81 8.06 8.34 3.47

Africa 3.63 3.74 3.83 2.41

FSU 4.49 4.54 4.58 0.88

Other Europe 0.64 0.65 0.66 1.54

Total world 90.25 91.20 92.36 1.27

Previous estimate 90.20 91.15 92.32 1.28

February 2015

Table 1. World oil demand, million b/d

2013 2014 2015 2015/14 %

Americas 24.08 24.18 24.39 0.87

Europe 13.61 13.40 13.31 -0.67

OECD Asia 8.32 8.14 8.02 -1.47

Total OECD 46.01 45.72 45.72 0

Other Asia 11.06 11.27 11.52 2.22

China 10.07 10.46 10.77 2.96

Latin America 6.50 6.70 6.90 2.99

Middle East 7.81 8.06 8.34 3.47

Africa 3.63 3.74 3.83 2.41

FSU 4.49 4.54 4.58 0.88

Other Europe 0.64 0.65 0.66 1.54

Total world 90.20 91.15 92.32 1.28

Previous estimate 90.20 91.13 92.26 1.24

January 2015

Table 1. World oil demand, million b/d

2013 2014 2015 2015/14 %

Americas 24.08 24.18 24.37 0.79

Europe 13.61 13.40 13.31 -0.67

OECD Asia 8.32 8.14 8.02 -1.47

Total OECD 46.01 45.72 45.70 -0.07

Other Asia 11.06 11.28 11.53 2.22

China 10.07 10.45 10.75 2.87

Latin America 6.50 6.71 6.91 2.98

Middle East 7.81 8.07 8.35 3.47

Africa 3.63 3.73 3.82 2.41

FSU 4.49 4.54 4.58 0.88

Other Europe 0.64 0.65 0.66 1.54

Total world 90.20 91.15 92.30 1.26

Previous estimate 90.20 91.13 92.26 1.24

December 2014

Table 1. World oil demand, million b/d

2013 2014 2015 2015/14 %

Americas 24.08 24.15 24.31 0.66

Europe 13.61 13.39 13.30 -0.67

OECD Asia 8.32 8.16 8.04 -1.47

Total OECD 46.01 45.71 45.64 -1.53

Other Asia 11.06 11.28 11.52 2.13

China 10.07 10.42 10.73 2.98

Latin America 6.50 6.78 6.93 2.21

Middle East 7.81 8.09 8.38 3.58

Africa 3.63 3.72 3.81 2.42

FSU 4.49 4.55 4.60 1.10

Other Europe 0.64 0.65 0.66 1.54

Total world 90.20 91.13 92.26 1.24

Previous estimate 90.14 91.19 92.38 1.31

April 2015

Table 2. World economic growth: OPEC’s forecast