OPEC Crude grades’ Prices Rises by 70% in 24 Months
The Organisation of Petroleum Exporting Countries (OPEC) has said the average price of its members’ crude grades (OPEC Basket) rose by 70 per cent in two years to $73.27 per barrel (bbl).
Oil prices crashed globally in 2014 from over $100 per barrel to below $30 per barrel. However, from 2016, prices started to rally to $40 and above per barrel, and have continued to $70 and $80/bbl.
OPEC document (August/September 2018 OPEC Bulletin) said: “Since the end of 2016, the OPEC Reference Basket has increased by nearly 70 per cent, gaining $30 to average $73.27/bbl in July 2018. During the same period, ICE Brent improved by 60 per cent to reach $75/bbl, while NYMEX WTI rose by 55 per cent to settle above $70/bbl, for the first time since late 2014, at $70.58/bbl.
“Oil prices increased during this period amid decreasing oil inventories, which have switched from showing a huge over-hang to the five-year average at the end of 2016, to now standing at a deficit. Furthermore, robust global demand and growing geopolitical tension have supported the rise in crude oil prices. In addition, a record increase in financial market trader activity also contributed to bullish sentiment.
“On the product side, fuel prices globally trended upwards in 2018 in response to rising crude prices. In the US, gasoline prices reached a 33-month record high of $96/bbl in May, up by 30 per cent compared to $75/b a year earlier. At the same time, refinery margins performed well, reaching a high of $18.55/bll during the same month, both due to refineries being offline during peak maintenance, as well as healthy product demand.
“Looking ahead, healthy global economic developments and increased industrial activity should support the demand for distillate fuels in the coming months, leading to a further drawdown in diesel inventories, which already stand well below the five-year average in the Organisation for Economic Cooperation and Development (OECD) region. Additionally, the lack of investments in fuel oil desulphurisation units, to accommodate the IMO 2020 regulations amid the declining high-sulphur fuel-oil refinery output will likely boost diesel requirement, as a cleaner substitute for bunker fuel oil. These two factors could lead to further market tightness for diesel, thus exacerbating pressure on diesel prices.”
The report noted that compared to the previous year, there had been an improvement in crude oil prices. The extent of the increases in the benchmarks has varied, impacted by different market fundamentals on each side of the Atlantic, adding that product prices have generally followed the upward trajectory of crude oil prices.
On the world economy, the OPEC report stated that the global GDP growth forecast remains at 3.8 per cent for 2018 and 3.6 per cent for 2019, unchanged from the previous assessment while world oil demand growth is anticipated to increase by 1.64million barrels per day (bopd), 20,000 bopd lower than last month’s projections, mainly due to weaker-than-expected oil demand data from Latin America and the Middle East in second quarter 2018.
Total oil demand is anticipated to reach 98.83million bopd. For 2019, world oil demand is forecast to grow by 1.43million bopd, also some 20,000 bopd lower than last month’s assessment. Total world consumption is anticipated to reach 100.26million bopd. The OECD region will contribute positively to oil demand growth, rising by 270,000 bopd year-on-year (y-o-y), yet with growth of 1.16million bopd, non-OECD nations will account for the majority of growth expected. Non-OPEC oil supply in 2018 was revised up by 73,000 bopd from the previous monthly oil market report (MOMR) to average 59.62million bopd, representing an increase of 2.08million bopd y-o-y. The main reason for this upward