OIL AND GAS

OIL PRICES SHOW RESILIENCE EVEN AS GLOBAL HEADWINDS WEIGH

Crude oil prices rebounded in April from the low levels seen in March as global economic uncertainty eased up. In April, ICE Brent and NYMEX WTI were higher, month on month, on average by 5.3% and 8.3%, respectively.

Oil futures prices were also supported by a large drop in US crude oil stocks of more than 21 million barrels, while the temporary suspension of some crude oil exports from Turkey tightened the supply outlook, adding further support to prices.

Market sentiment improved further after data showing a surge in China's crude oil exports in March that reached a 33-month high. The easing of inflation, as shown in US consumer price data for March, raised optimism in early April that the US Federal Reserve may ease its monetary policy tightening.

However, global financial markets dropped due to renewed worries about an economic slowdown and concerns over the US banking sector

The Organization for the Petroleum Exporting Countries (OPEC) forecasts oil demand to grow 2.5 million barrels per day (mbpd) year on year. In the Organisation for Economic Co-operation and Development (OECD), oil demand was adjusted slightly downward in the 4Q22 amid data showing a demand decline in OECD Americas.

“This was entirely offset by a slight upward revision to the estimation for non-OECD countries. For 2023, the forecast for world oil demand growth remains broadly unchanged at 2.3 mbpd, with the OECD projected to grow by almost 0.1 mbpd and the non-OECD expected to grow by about 2.3 mbpd. Within the regions, slight downward adjustments in 1Q23 for the OECD were oset by upward revisions to the non-OECD,” according to OPEC.

OPEC also expects capital spending on oil and gas in non-OPEC countries to rise 10% after clocking USD 431 billion last year. Exploration and production spending in 2023 is expected to rise 26% in Norway, 15% in Brazil, 12% in the US, and 8% in Canada.

 

A key driver of oil prices is Chinese demand. OPEC sees oil demand for most products in China rising. Domestic mobility and air travel are hovering close to 80% of pre-pandemic levels. China’s GDP is also forecast to remain firm at 5.2% in 2023, which would translate to a year-on-year oil demand growth of 0.8 mbpd.

“In 2Q23, oil demand is set to see y-o-y growth of 1.0 mbpd. Domestic and international airline activity is expected to rise as the increase in international business and tourism combines with pent-up demand. This is also providing support for the jet fuel demand to spur oil demand growth,” OPEC stated.

Gasoline demand is forecast to improve, driven by a strong rebound in mobility. Similarly, the petrochemical industry has continued to operate at around full capacity. Stable demand will boost feedstock demand for light distillates. Fiscal stimulus, along with infrastructure expansion in 2023, will set the stage for a robust diesel consumption recovery.

OPE also expects third quarter demand to rise 800,000 barrels per day (bpd), on the back of rising jet fuel consumption and expansion of petrochemical industries.

OPE also expects third quarter demand to rise 800,000 barrels per day (bpd), on the back of rising jet fuel consumption and expansion of petrochemical industries.

  

Saudi Aramco recorded stellar results in the first quarter. Net income reached USD 31.9 billion, with cash flow from operating activities at USD 39.6 billion. The oil company’s Q4 2022 dividend of USD 19.5 billion will be paid in the first quarter, representing a 4% increase from the previous quarter. Meanwhile, Q1 2023 dividend of USD 19.5 billion will be paid in the second quarter.

“Our growth strategy remains on track and we made significant progress on the strategic expansion of our downstream business during the quarter, announcing a key acquisition in the US as well as important investments and partnerships in China and South Korea,” said Amin Nasser, president and CEO of Aramco. “Our global downstream strategy is gaining momentum, and we are leveraging cutting-edge technologies to increase our liquids-to-chemicals capacity and meet anticipated demand for petrochemical products.

In March, Aramco broke ground on a major integrated refinery and petrochemical complex being developed by Huajin Aramco Petrochemical Company (HAPCO). The joint venture between Aramco (30%), NORINCO Group (51%) and Panjin Xincheng Industrial Group (19%) is developing the complex in the city of Panjin, in China’s Liaoning Province.

The complex is expected to be fully operational by 2026, with Aramco seen supplying up to 210,000 bpd of crude oil feedstock to the facility.