By Pratap John
DOHA: Lack of refinery flexibility is impacting the global crude oil market, Opec’s latest market report said.
Between 2000 and 2007, the growth in distillate demand outpaced the increase in gasoline consumption, mainly because of the resilient economic situation in developing countries, and more recently, the increased use of diesel generators.
While distillate demand rose by 5.2mn bpd, the Opec report said gasoline consumption increased by only 2mn bpd during the period.
Refiners built 1.2mn bpd of conversion units for gasoline but only 700,000bpd of conversion units for distillates, resulting in a “mismatch” between product demand and refinery output.
“The lack of refinery operational flexibility due to the shortage of proper conversion units to produce more middle distillates has left refiners with little option but to increase light grade throughputs. This has resulted in a widening spread between light and heavy crude,” Opec said.
The persistent mismatch between the product demand pattern and the refinery configuration has put “further upward pressure” on light crude prices.
Downstream constraints are continuing to contribute to the high risk premium for these grades, leaving the market “increasingly sensitive” to any disruption in light crude supplies.
The report also said the non-Opec supply growth in 2008 is expected to average 50.18mn bpd in 2008, up 0.74mn bpd on 2007.
The world oil demand in 2008 is forecast at 86.95mn bpd (average), mainly due to rapidly developing China, India, Middle East and Latin American countries.
Demand in North America is forecast to be flat while oil demand in other OECD regions are expected to decline due to weakening transport fuel demand in the second quarter.
The latest Opec report forecasts the world economic growth at 3.9% in 2008, unchanged from the previous one. Forecasts for Japan were revised slightly up while for the Eurozone slightly down.
The forecast for the US is unchanged at 1.1%. In the narrow technical sense, the US is not yet in recession, Opec said.
Citing Q1 figures for US GDP, Opec said the US economy still indicates “positive” growth, although at a meagre 0.6% yearly rate, mainly on continued strength in exports and a rise in inventories.
“US payrolls in April fell for the fourth month, but the loss of 20,000 jobs was much smaller than the average of 80,000 a month in the first quarter of 2008. Overall, the better-than-expected data and signs that the Fed’s easing cycle was at an end, helped lift the dollar from its lows versus the euro and yen,” it said.
However, the Opec report cautioned inflation continued to trouble China, India and other emerging markets and could dampen the world economic growth in the months ahead. |
