Crude Oil Price Movements

The OPEC Reference Basket rose 42¢ to $43.10/b in August. ICE Brent ended up 62¢ at $47.16/b, while NYMEX WTI was unchanged at $44.80/b. The Brent/WTI spread widened further to $2.36/b in August. Crude price rose on signs of an improving supply/demand balance and US dollar weakness, although a surprise build in US crude stocks, increasing supplies and worries about Chinese demand pressured prices at the end of the month.

World Economy

World economic growth was revised down to 2.9% for 2016 and remains at 3.1% for 2017. Weak 1H16 growth caused a downward revision to the US growth forecast for 2016 to 1.5%, while the 2017 forecast remains at 2.1%. Growth in Japan was also revised down to 0.7% given weak 1H16 growth. Euro-zone growth remains unchanged at 1.5% for this year and 1.2% for 2017. Forecasts for China and India are also unchanged at 6.5% and 7.5%for 2016 and 6.1% and 7.2% for 2017. The figures for Brazil and Russia remain unchanged from the August MOMR, with growth forecast at 0.4% and 0.7% respectively for next year.

World Oil Demand

World oil demand growth in 2016 is now anticipated to increase by 1.23 mb/d after a marginal upward revision, mainly to reflect better-than-expected OECD data for the first half of the year. Oil demand in 2016 is expected to average 94.27 mb/d. In 2017, world oil demand is anticipated to rise by 1.15 mb/d, unchanged from the August MOMR, to average 95.42 mb/d. The main growth centres for next year continue to be India, China and the US.

World Oil Supply

Non-OPEC oil supply in 2016 is now expected to contract by 0.61 mb/d, following an upward revision of 0.18 mb/d from the August MOMR to average 56.32 mb/d. This has been mainly due to a lower-than-expected decline in US tight oil and a better-thanexpected performance in Norway, as well as the early start-up of Kashagan field in Kazakhstan. In 2017, non-OPEC supply was revised up by 0.35 mb/d to show growth of 0.20 mb/d to average of 56.52 mb/d, mainly due to new production from Kashagan. OPEC NGLs are expected to average 6.43 mb/d in 2017, an increase of 0.15 mb/d over the current year. OPEC output, according to secondary sources, dropped by 23 tb/d in

August to 33.24 mb/d.

Product Markets and Refining Operations Product markets in the Atlantic Basin strengthened in August. Refining margins were supported by the positive performance at the top of the barrel due to strong gasoline demand and export opportunities to the EU, as well as concerns about weather disruptions

from tropical storms and flooding in the US Gulf Coast. In Asia, margins showed a slight recovery on the back of firm demand and falling inventories ahead of autumn maintenance.

Tanker Market

Dirty tanker spot freight rates remained under pressure in August, with negative developments among all classes. VLCC, Suexmax and Aframax spot freight rates declined by 12%, 30% and 14% since July. The drop in rates was mainly driven by excess tonnage supply due to new deliveries at a time when cargo loading requirements remain limited.

Stock Movements

OECD total commercial stocks fell in July to stand at 3,091 mb, some 341 mb above the latest five-year average. Crude and product inventories showed surpluses of 200 mb and 141 mb, respectively. In terms of days of forward cover, OECD commercial stocks in July stood at 66.1 days, around 7 days higher than the seasonal average.

Balance of Supply and Demand

Demand for OPEC crude in 2016 is estimated to stand at 31.7 mb/d, some 1.7 mb/d over last year. In 2017, demand for OPEC crude is forecast at 32.5 mb/d, an increase of 0.8 mb/d over the current year.