OPEC upgraded on Wednesday its 2016 projections for world oil demand growth to 1.22 million barrels a day (mb/d), up by 30,000 b/d from its previous estimate, but warned that there were “lingering concerns” that refiners in the U.S. and Europe may cut processing rates, which could decrease the demand for crude.
In its Monthly Oil Market Report that came out on Wednesday, OPEC said that now its latest estimates peg the total oil demand at 94.26 mb/d. For 2017, global oil demand is expected to grow at the same level anticipated last month; that is, going up by 1.15 mb/d from 2016 levels. The total 2017 oil consumption is projected to hit a new record of 95.41 mb/d, OPEC noted.
While either affirming or slightly upgrading last month’s forecasts, OPEC alerted that lingering concerns persist that the “U.S. and European refiners could cut runs in response to a declining gasoline crack in both regions in a period when summer driving and margins should have been at their highest during the year.” This was the main reason why crude prices have come under downward pressure in recent weeks, OPEC said.
Gasoline demand could drop after the end of the driving season in the third quarter of 2016. The supply side may also pressure middle distillates as stockpiles remain high across the world, especially in the OECD, where inventories are currently around 80 million barrels higher than the latest five-year average, OPEC commented.
In addition, lower-than-anticipated demand, high refined-product inventories, and growing crude supply led to the first decline of the OPEC Reference Basket in five months. In July, the OPEC Reference Basket averaged $42.68 per barrel.
In its previous report in July, OPEC said it expected the oil market balancing later this year, leaving its forecasts largely unchanged.
At the time of writing, West Texas Intermediate (WTI) Crude traded at US$42.03, down 1.73 percent, and Brent Crude was down 1.47 percent to US$44.32.