Crude oil prices fell below $100 for the first time since mid-2012 in April on seasonal factors and softening market fundamentals. This was followed by a small rebound in early May, according to NBK’s latest Economic Update.
NBK said crude oil prices dropped significantly through April, taking them to their 10-month lows. The price of Kuwait Export Crude (KEC) fell below $95 per barrel (pb) in mid-April, while Brent crude fell to $96. In both cases, this was the first spell below $100 since last July, and at least $11 below their March averages.
West Texas Intermediate (WTI) – which is sometimes driven by narrower supply/demand conditions in the US – fared a little better, falling by a smaller $7 to a trough of $87 from its March average of $93.
These declines were followed by a modest rebound in early May which pushed Brent and KEC back over the $100 mark. However prices remained well below earlier levels.
Since the start of the year, analysts’ downgrades to forecasts of global oil demand growth have been gradual but recurrent.
Demand is now generally seen rising by 0.8 million barrels per day (mbpd) this year (0.9 per cent), versus the 1.0 mbpd forecast in January.
This is slightly below the growth seen in 2012. Within the overall total, the downgrade has largely been driven by Europe, in light of its deteriorating economic situation.
By contrast, demand growth forecasts in other developed markets are more or less unchanged. The expected slowdown in emerging markets demand growth this year – to 1.3 mbpd from 1.4 mbpd in 2012 – is seen coming from all regions other than Africa, where growth is due to accelerate on stronger economic performance.
The overall level of oil demand in emerging markets may exceed that in developed markets in 2Q 2013 for the first time in history.
Crude output of the OPEC-11 (i.e. excluding Iraq) slipped by some 120,000 bpd in March to an 18-month low of 27.1 mbpd – extending declines to their fifth consecutive month.
The bulk of this slippage came from Nigeria (64,000 bpd) and Iran (49,000 bpd), where oil theft and tightening western sanctions have significantly disrupted production levels. Despite a slight recovery in recent months from its record low in October, Iranian output lost the majority of these gains in March.
In Nigeria, output fell below the 2 mbpd mark for the fourth time over the last year. Other smaller declines were witnessed in Kuwait (14,000 bpd) and the UAE (9,000 bpd) – though figures from ‘direct communication’ cite larger falls.
The only significant production increase came from Saudi Arabia, where output edged up by 41,000 bpd to just above 9.1 mbpd. Saudi oil production may rise further in coming months in order to meet growing domestic demand for power generation during the summer months – typically running from April to September.
Total OPEC production (including Iraq) dropped to below 30.2 mbpd, following a slight recovery in the previous month.
This came despite production gains in Iraq, which saw output climb by a further 19,000 bpd to almost 3.1 mbpd in March. Iraqi oil production has seen a steady rise since the beginning of 2013 – by almost 0.1 mbpd – but further larger increments may be limited by infrastructure and security issues.
Non-OPEC supplies are projected to increase by as much as 1.5 mbpd in 2013, of which around one fifth will come from OPEC NGLs.
This will be supported by strong North American production, as well as the resumption of oil production in other non-OPEC countries such as Yemen and South Sudan. In total, global supplies are expected to rise by less than 1 mbpd in 2013, following a rise in excess of 2 mbpd last year, as cuts in OPEC output partially offset stronger non-OPEC supplies.
