The markets have experienced a modest level of short covering over the last few days especially for WTI. Some of the global equity markets have recovered a bit from the lows experienced on Monday as shown in the EMI Global Equity Index table below. That said the Index is about unchanged over the last twenty four hours with most bourses in the developed world adding value while several markets in Asia and Brazil continued to slide. The Index is still down by 16.7% for the year with eight of the ten bourses in the Index still showing double digit losses for 2011. Paris and Germany remain in bear market territory with Brazil very near moving back above the 20% loss threshold. Equities continue to suggest a bearish outlook for the global economy and thus a bearish outlook for oil demand growth and oil prices going forward.
Following the above comment the IEA released their latest monthly oil market report yesterday and as expected they lowered their oil demand growth forecast for both 2011 and 2012 on the basis of a slowing global economy. The highlights of their report follow:
Uncertain global economic and financial prospects underpinned volatile oil futures prices in August and early September. WTI and Brent followed divergent paths last month, with the price spread hitting record levels of over $27/bbl in early September. Prices at writing were $111/bbl for Brent and $86/bbl for WTI.
Global oil demand is revised down by 0.2 mb/d for 2011 and by 0.4 mb/d for 2012 on lower non-OECD readings and reduced economic growth expectations. Global GDP growth is now seen at 3.9% in 2011 and at 4.2% in 2012 with significant downside risks. Demand estimates now stand at 89.3 mb/d in 2011 (+1.0 mb/d y-o-y) and 90.7 mb/d in 2012 (+1.4 mb/d y‑o‑y).
World oil supply rose by 1.0 mb/d in August, to 89.1 mb/d, with non-OPEC production up by 0.8 mb/d. Rising US and Latin American production offset heavy maintenance and field outages in the North Sea. Non-OPEC supply has been revised lower to 52.8 mb/d in 2011 on outages in the Middle East and China, rising to 53.8 mb/d in 2012.
August OPEC crude oil output was up by 165 kb/d, to 30.26 mb/d with production still 1.04 mb/d below the 31.3 mb/d 3Q11 ‘call on OPEC crude and stock change’. However, the ‘call’ for 4Q11 has been lowered by 0.2 mb/d to 30.5 mb/d, due to weaker demand. With the end of Libya’s civil conflict on the horizon, we have revised up our Libyan capacity outlook for 4Q11 by 0.1 mb/d, to 0.3 mb/d.
Global refinery crude runs have been revised down by close to 0.3 mb/d for both 3Q11 and 4Q11 in light of the weaker demand outlook and higher outages scheduled for a number of countries. Global throughputs are now seen rising 1.7 mb/d in 3Q11 versus 2Q11, to 75.6 mb/d and averaging 75.4 mb/d in 4Q11.
OECD industry oil inventories rose by 10.8 mb to 2 687 mb, or to 58.4 days of forward demand, in July. Stocks fell below the five-year average for the first time since the economic recession of 2008. Preliminary data indicate OECD stocks remained tight in August, rising by a modest 0.6 mb.