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Global/Oil MarketBack
[Published: Monday November 13 2023]

 Global oil market fundamentals remain strong despite exaggerated negative sentiments

VIENNA, 13 Nov. - (ANA) - Recent data confirms robust major global growth trends and healthy oil market fundamentals. On the global economic growth front, and as the US economy continues the very strong growth it experienced in 3Q23, the IMF has recently upgraded Chinese economic growth projection for 2023 to 5.4%. However, potential downside risk to current robust global economic growth forecasts, although minor, may include sustained restrictive monetary policies to fight inflation, and geopolitical developments.
With  this,  and  despite  the  overblown  negative  sentiment  in  the  market  regarding  China’s  oil  demand performance, and global oil market in general, the latest data shows Chinese crude imports increasing to 11.4 mb/d in October, and remaining on track to reach a new annual record high for this year, at around the same level.
In  fact,  the  Chinese  crude  imports  remained  very  healthy,  at  a  record  level  that  is  well  above  the  five-years average range, rising by around 240 tb/d, month-on-month, with year-on-year crude imports at 1.2 mb/d higher. Similarly, India’s crude imports are also expected to pick up in 4Q23, reaching a record high this year. 
As the global oil demand continues to demonstrate strength  and  resilience,  with  better-than-expected growth in 4Q23, mainly in non-OECD countries, the Secretariat’s  latest  forecast  for  global  oil  demand  growth for 2023 is revised up to reach at 2.5 mb/d.  Graph 1: Chinese crude oil imports Evidently,  Asian  refining  margins  remain  strong compared  to  historical  levels.  Jet/kerosene  crack  averaged $23.77/b  against  Dubai  in  Singapore.  Expectations of an increase in international air travel activity  during  the  holidays  and  possibly  stronger  export requirements to OECD Europe and Americas will   most   likely   support   jet/kerosene   markets   towards  the  year-end.  The  gasoil  crack  spread  averaged  $23.67/b  against  Dubai  in  Singapore  in  October. 
Even the gasoline crack spread averaged  $3.90/b  against  Dubai  in  October,  and  improved to around   $5/b   at   the   beginning   of   November.Graph 2: Singapore crack spreads vs. DubaiThe   supply   picture   also   remains   strong   with   non-OPEC   supply   revised   up   slightly   to   reach   1.8 mb/d  for  2023,  the  US  being  the  main  growth  contributor.  Clearly,  the  US  liquids  supply  growth  has been stronger than what is suggested by weekly data.  
In  fact,  the  weekly  data  which  has  been underestimating UScrude     production since January, as this were followed by significant monthly data   upward   catch-up   trend,   especially   since   August. The more reliable monthly data indicates a very   gradual   increase   in   US   crude   production. 
The  robust  physical  crude  market  is  further  reflected  in  the  strong  crude  differentials  seen  in  almost  all  regions  in  October  and  continued  in  early  November. 
At  the  same  time,  and  based  on  the  available  secondary  sources  to  date,  the  overall  OPEC-11  crude  production  in  October  remained  well-below  the  agreed level related to production adjustments under the Declaration of Cooperation (DoC). For example, Nigeria has seen some production increase, but remained well below its required production level. It is also important   to   add   that   the   recent   increase   in   OPEC   crude   exports   reflects   seasonal   trends.   
Shipments from OPEC producers in Middle East tend to decline in the summer, amid higher demand for cooling and then rise again in September and October, as these volumes return to the market. For example, Saudi crude exports increase is quite normal as local demand drops in line with expected seasonality trend. Among  non-OPEC  participants  in  the  (DoC),  and  despite  the  increase  in  its  seaborne  crude  exports,  Russia’s product exports have decreasing over the last few months. 
With  this  supply/demand  dynamics,  global  crude  stocks have declined in 3Q23, reflecting high global crude runs, as well as the voluntary adjustments by DoC  countries.  Clearly,  the  recently  overplayed  observation  of  the  increase  in  global  inventories  is  simply    due    to    the    typical    seasonal    trends,    particularly the heavy refinery maintenance. Overall, the global crude inventories remain below the 2017–2022 average.
Despite  the  above  healthy  and  supportive  market  fundamentals,  oil  prices  have  trended  lower  in  recent  weeks, mainly driven by financial market speculators, as they have sharply reduced their net long positions over the month of October, compared to the late September, particularly in the NYMEX WTI futures and options contracts.
In  fact,  data  shows  that  hedge  funds  and  other  money  managers  have  heavily  cut  their  bullish  positions  over  the  month  of  October,  selling  an  equivalent of 161 mb and 43 mb of NYMEX-WTI and ICE-Brent      futures      and      options      contracts,      respectively.  In  total,  they  have  sold  an  equivalent  of more than 200 mb of oil since late September, or about 37% of total bullish positions. This has fuelled market  volatility  and  accelerated  the  price  decline  (Graph  5).  The  selloffs  were  also  observed  in  speculative   positions   in   petroleum   products   in   October,   specifically   for   ICE   gasoil   in   Europe.   ICE gasoil net long positions fell by an equivalent of around 28 mb since late September.
Indeed, the above strength in market fundamentals would not have been possible without the precautious, proactive,  and  pre-emptive  approach  adopted  by  OPEC  and  non-OPEC  Participating  Countries  in  the  Declaration  of  Cooperation  (DoC).  Going  forward,  countries  participating  in  DoC  will  continue  their  commitment to achieve and sustain a stable oil market and provide long-term guidance for the market, in line with their decisions most recently reaffirmed during the 35th OPEC and non-OPEC Ministerial Meeting, which extended the agreement until the end of 2024. Clearly, the voluntary production adjustments by many DoC  countries  as  of  November  until  end-2024,  along  with  extended  Saudi  Arabian  voluntary  crude  production adjustment of 1.0 mb/d until the end of 2023 and the Russian extended voluntary adjustment of 300 tb/d in crude oil exports over the same period, will contribute significantly to achieve and sustain global oil market stability.   - (ANA) -
For graphs and the full report, visit: file:///Users/alibahaijoub/Downloads/Embargoed_copy%E2%80%93OPEC_MOMR_November-2023.pdf
AB/ANA/13 November 2023 — - -

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