Fundamentals is our monthly review of global oil data, this is the August 2019 edition.
Crude oil balance:
- We have increased our Q2 19 build to 0.2 mb/d following a 0.1 mb/d downward revision to East of Suez runs.
- We have cut our Q3 19 draw by 0.3 mb/d to 2.1 mb/d amid unplanned refinery outages and weak East of Suez margins.
- Our Q4 19 draw is now 0.7 mb/d, down by 0.1 mb/d due to higher North American output.
- Our full-year 2019 balance shows a 0.7 mb/d draw; 2020 currently showing 0.3 mb/d draw.
- We have reduced our Q2 19 liquids draw to 0.1 mb/d, from a 0.5 mb/d last month, due to weak non-OECD demand and higher non-OPEC supply.
- Our Q3 19 outlook shows a larger 1.7 mb/d draw due to tighter OPEC supplies.
- We see liquids stocks as flat q/q in Q4 19 due to our expectation of higher Canadian output.
- Our 2020 liquids balance shows a 0.8 mb/d build, indicating OPEC will need to extend market management (which is currently not assumed in our balances beyond Q1 20), or light molecules will need to price for shut-ins.
- July global demand rebounds to 1.39 mb/d y/y growth amid strong preliminary Europe data.
- June demand came in 0.26 mb/d lower than preliminary estimates led by downward revisions to non-OECD Asian demand.
- May demand was in line with our tracking, largely flat y/y.
- We still see 2019 global demand rising by 0.9 mb/d and 2020 by 1.1 mb/d.
- Non-OPEC liquids (crude, biofuels and processing gains) production in July was pegged at 64.7 mb/d, higher y/y by 1.7 mb/d and up m/m by 0.3 mb/d.
- The y/y rise was entirely down to US liquids output, which rose by 1.7 mb/d to 18.2 mb/d. However, crude supply fell on a m/m basis as a result of Hurricane Barry.
- Since last month, our 2019 supply has been raised by 0.1 mb/d, while 2020 was revised higher by 0.3 mb/d mostly as a result of baseline revisions in Canada.
- OPEC produced 29.73 mb/d in July, lower m/m by 0.17 mb/d and y/y by 2.16 mb/d.
- Saudi Arabia and Iran led the m/m OPEC declines, while Venezuelan output rose marginally.
- We have cut Q3 19 OPEC forecasts by 0.13 mb/d on lower Saudi and Libyan production.
- July crude inventories drew by 36 mb in the OECD. Total liquids drew by 4 mb as products built by 14 mb, according to preliminary IEA data.
- We estimate non-OECD crude stocks drew by 10 mb in July, with China and the Middle East behind most of the draw.
- June revisions to IEA data saw total liquids inventories flip from a 2 mb draw to a 32 mb build, and crude draws lessen from 23 mb to 9 mb.
- We have lowered our Q3 19 price forecasts given the weakness in global demand, with Brent lowered from $76 per barrel to $69, and WTI reduced to $62 per barrel from $68.
- We have revised our Q3 19 WTI-Brent spread forecast to $6.50 per barrel, as new pipelines divert more crude away from Cushing to the Gulf Coast, while our Q3 19 outlook for Brent-Dubai is now at $2.00 per barrel from $4.30.
- We maintain our Q4 19 and 2020 price forecasts for Brent, WTI and LLS, though we revised our Brent-Dubai spread from $4.40 to $2.00 as sours continue to get bid.