Weakness in global oil markets, which has dragged prices to a three-month low, may persist as demand slows seasonally and fuel inventories remain abundant, Opec predicted.
There are “lingering concerns” that US and European refiners may reduce processing rates as profits fade amid a continuing “overhang” of crude and refined fuels, the Organisation of Petroleum Exporting Countries said in its monthly report. Gasoline consumption will taper off in the US with the end of the summer-vacation driving season, it said.
“With the end of the driving season in the third quarter, gasoline demand could see a seasonal downward correction,” the organisation’s Vienna-based research department said. High inventories of heating oil and diesel fuel around the world mean “the supply side could also continue exerting pressure,” it said.
Oil’s recovery from the 12-year lows reached in January sputtered out in early June amid plentiful stockpiles, faltering demand growth and signs that US explorers could resume drilling. Opec, which is sticking with a strategy to maximise its market share and let prices sag, said on Monday it will hold informal talks on the sidelines of a conference in Algiers next month.
“Refining margins have been weakening during the last month due to high product inventories, which were caused by the lower-than-expected increase in demand,” according to the report.
The re-balancing of world markets will resume towards the end of the year, according to Opec. Consumption will pick up in the Northern Hemisphere as winter approaches, reversing some of the discount on oil prices for immediate delivery and whittling away the excess in inventories, Opec forecast.
Production from Opec’s members increased by 46,400 bpd to 33.106mn a day in July, according to external sources compiled by Opec. That’s in line with the level the group expects will be needed in the third quarter. Opec included Gabon, which became its 14th member on July 1, in both June and July production totals.
Opec kept estimates for global supply and demand this year and next mostly unchanged from last month’s report.