Highlights of the latest OMR
dated: 16 January 2009
**Forecast global oil demand in 2009 is revised down by 1.0 mb/d, following a halving of assumed GDP growth to 1.2%, given the worsening outlook. Global oil demand is now projected at 85.3 mb/d in 2009 (‑0.6% or -0.5 mb/d year-on-year). The 2008 estimate is revised down 70 kb/d to 85.8 mb/d (-0.3% or -0.3 mb/d versus 2007). The expected two-year contraction in oil demand would be the first since 1982 and 1983.
**Global oil supply was flat in December at 86.2 mb/d, with curbed OPEC output offset by gains elsewhere. Non-OPEC supply for 2008 and 2009 is forecast at 49.5 mb/d and 50.0 mb/d, lowered by 60 kb/d and 30 kb/d versus last month’s report. 2008 output declined by 150 kb/d, partly due to the first fall in Russian supply since 1996. 2009 growth is forecast at 0.5 mb/d, in addition to a 0.6 mb/d increment in OPEC NGLs.
**December OPEC crude supply was 30.9 mb/d, down 330 kb/d versus November. This was 1 mb/d below September 2008 levels, and nearly 2 mb/d below mid-2008 highs. OPEC agreed a new target of 24.8 mb/d from January, equivalent to OPEC-13 output of 28.2 mb/d versus a reduced 2009 ‘call’ of 29.5-30.0 mb/d.
**1Q09 global refinery throughput is forecast at 72.3 mb/d, 1.2 mb/d lower than last month’s report. Weaker global demand and poor economics continue to hamper crude runs. Evidence of more structural changes to the refining industry is emerging in addition to reduced plant operation rates.
**OECD industry stocks fell by 2.0 mb to 2,658 mb in November, as a US build was offset by lower European crude and Pacific distillates. Despite a downward revision to October data, end-November forward demand cover remains high at 56.4 days on lower OECD demand. Preliminary December data indicate an OECD draw of 8.0 mb.
**Crude oil prices rose to nearly $50/bbl in early January, supported by cold weather, the Russian/Ukrainian gas crisis and fighting in Gaza. Subsequently, weak global refinery demand and an increasing crude overhang have pressured Brent futures to currently around $45/bbl, while WTI was at $35/bbl, distorted by record-high Cushing stocks.
So, the key here is that despite the global recession currently underway, supply demand is still about equal. That means any increase in economic (particularly manufacturing or infrastructure work) activity will tilt the balance and any geopolitical event could cause a run on oil (DBO), (USO), (DXO).
Is oil going back to $147, not without a major event (but, is that so far out of the question?). But to think it could double from here this year is within the realm of reasonableness. Global gov’t stimulus is going to be tilted towards “shovel in the ground” projects and that means oil demand rises. Supply is down and both OPEC and Non-OPEC production has been curtailed also. Production increases will lag and demand increase so price pressure will be upwards.
Regarding production the report says:
“Forecast non‐OPEC production is trimmed by 290 kb/d for 4Q08 and 345 kb/d for 1Q09, then by
around 150 kb/d for the remainder of 2009. Longer‐than‐expected outages affecting the GOM and
Azerbaijan curb early 2009 supply, as do weaker expectations for the North Sea and Australasia.
Forecast 2009 production from Russia and Canada is trimmed on fiscal and investment barriers and
field underperformance, while weaker expectations also now prevail for Malaysia and Vietnam.”
“OPEC‐11 production, excluding Iraq and Indonesia, fell by 825 kb/d in November, representing apparent compliance with the 1.5 mb/d cuts in target output agreed on 24 October of around 55%. However, as noted above, further reductions are also scheduled for December supply. OPEC Ministers gathered in Cairo on 29 November, ahead of their next scheduled meeting in Algeria on 17 December. In the end, no further decision on output policy was taken, due apparently to uncertainties over upcoming winter weather and the fact that it was too early to judge the impact of production curbs only put in place from 1 November.”
The December meeting resulted in further production cuts..
FULL REPORT:
1/16/2009 IEA Report
Disclosure (“none” means no position):Long DXO
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