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OPEC crude production picking up


OPEC crude production picked up in April 0.3mmb/d MoM according to the EIA’s Short-Term Energy Outlook (STEO) and OPEC’s Monthly Oil Market Report (MOMR), which is based on secondary sources. That was largely down to production hikes by Saudi Arabia and Iraq. Other forecasters have a more modest MoM increase (0.2mmb/d on average) but the consensus view is that OPEC production is picking up and is above the group's 30.0mmb/d collective production target, which could prove significant ahead of its ordinary meeting scheduled for 31 May.

The EIA’s STEO had global demand for 2013 marginally down to 89.9mmb/d, from 90.0mmb/d in the previous month’s forecast, with the drop in demand attributable to OECD demand. That, and a slightly higher forecast for non-OPEC supply, had the ‘call on OPEC crude’ 0.1mmb/d lower MoM. OPEC’s MOMR, however, had the ‘call on OPEC crude’ 0.1mmb/d higher MoM after leaving 2013 demand unchanged at 89.7mmb/d and lowering its 2013 estimate for OPEC NGLs production.

Once more, using the data from the STEO and MOMR resulted in differing views on the implied market under/over-supply for 2013. Keeping OPEC crude production at current levels prospectively, the market would be marginally under-supplied in 2013 according to the EIA’s data (-0.1mmb/d) but over-supplied according to data per the OPEC’s MOMR (+0.6mmb/d).

The IEA, which is generally regarded as the most authoritative of the major public supply/demand forecasters, publishes its Oil Market Report (OMR) today.

In data published yesterday, net managed money futures and options positions on the ICE in Brent, generally regarded as the most directionally driven speculative category, jumped 14.4% (15,294 positions) in the week ended 7 May, rising to 124,035 positions, the highest in a month (Figure 2). Over that same week, Brent rose to USD 104.40/bbl (up USD 2.03/bbl, +2.0% WoW). On the other side of the Atlantic, CFTC data published last Friday had net managed money futures and options positions on NYMEX in WTI picking up 10,572 positions (+5.5%) WoW and rising to 204,534 positions. WTI closed the week ended 7 May higher at USD 95.62/bbl, up USD 2.16/bbl (+2.3%) WoW. The WTI-Brent discount remained largely unchanged WoW at USD 8.78/bbl.

Despite the increased market bullishness as implied by the rising managed money positions, in our view, oil price risks remain to the downside and we expect today’s IEA’s OMR to continue to suggest that the oil market remains over-supplied. 

Colin Smith, Marc Jacouris
VTB Capital analyst

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