The past few days has seen the release of key agency forecasts, with OPEC and the EIA monthly reports released yesterday and the IEA report released this morning.
The first tranche of upward revisions to global oil demand arrived in the latest key agency forecasts, led primarily by better than expected Chinese oil demand. Most of these reports do not factor in the even stronger November figures from the country, and thus we expect further upward revisions to global oil demand in the coming months.
China has not been the only country to have surprised to the upside; Mexico, Brazil, India and even parts of Europe have come in significantly stronger than forecasts suggested. While non-OPEC supplies were revised higher across most of the reports as well, the revision was concentrated in the US, with downward revisions made to other parts of non-OPEC supply. In our view, the risks to the rest of non-OPEC supplies disappointing remains high, given that South Sudan, Yemen, Brazil and North Sea are all seen reviving by consensus forecasts in 2013, and yet the actual data so far continues to disappoint significantly.
Crude stock levels outside the US remain low, with the backwardation in Brent still providing little incentive to build stocks. What, however, stands out amongst all of this are the acutely low levels of stocks in middle distillates, with preliminary November figures taking them some 50 mb below the seasonal average. Although European margins remain very weak and the start-up of plenty of new refining capacity in Asia and US together with the return of refineries from maintenance allows for supplies to recover against a backdrop of rather poor demand in Europe, the extremely cold weather and equally extremely low inventory levels make the risk of gasoil price spike in the winter non-trivial.