New York — Crude futures ended slightly lower Monday despite a fall-off in Saudi Arabian production and tighter fundamentals.
October ICE Brent crude settled 20 cents/b lower at $72.61/b, while the September NYMEX WTI crude settled 43 cents/b lower at $67.20/b.
In refined products, September NYMEX RBOB slipped 2.45 cents to settle at $2.0147/gal while September NYMEX ULSD edged down 27 points to settle at $2.1370/gal.
Saudi Arabia's 200,000 b/d July production drop to 10.29 million b/d as reported in OPEC's monthly report shows Saudi Arabia is "not doing what they said," said Gene McGillian, analyst with Tradition Energy.
June's OPEC meeting ended with a commitment for just under 1 million b/d of increased output, supported by Saudi Arabia and Russia.
However, Monday OPEC revised its world oil demand projections to average 98.83 million b/d, revising its demand growth forecast lower by 20,000 b/d to 1.64 million b/d.
"Weaker-than-expected data from the Middle East and Latin America on the back of fuel substitution, subsidy reduction policies as well as slower overall industrial activities impacted oil demand data negatively, mostly in Q2 18," the OPEC report said.
For 2019, demand growth was expected to reach 1.43 million b/d, 20,000 b/d down from OPEC's previous projections.
Specifically for OPEC crude, demand was pegged at 33.40 million b/d for both the third and fourth quarters of 2018, which was 1.08 million b/d more than the bloc's July production level, as assessed by the independent secondary sources used by OPEC to track member output.
Higher current Libyan output added to supply. Reports Libya's crude output climbed to 900,000 b/d is supportive for raising OPEC's production output, but fears remain over fighting that shut fields and ports and cut July's output to 670,000 b/d.
"Libya is always trying to increase production, but can they maintain it?" said McGillian.
McGillian said that in the US, "we are at a three-year low in stocks" and that global inventories are right now at a five-year average.
However, any market tightness will ease in 2019, according to OPEC forecasts, as growth in non-OPEC supplies will outpace the projected increase in global demand, bringing demand for OPEC crude back down to 32.05 million b/d for the year.
The report said, however, that "if any unexpected supply outages should occur due to natural disasters/technical shortcomings and these coincide with any geopolitical supply disruption, it could bring the market into an imbalanced situation." Industry investment has yet to recover to levels seen before the 2014 price crash, the report said.
CRUDE STOCKS SET TO DECLINE AGAIN
Analysts polled by S&P Global Platts Monday were looking for US crude inventories to have declined by 1.7 million barrels for the week ending August 10, with refinery runs remaining high on healthy margins and strong export demand.
US Energy Information Administration data shows crude stocks trending lower this time of year. Analysts expect a 1.7 million-barrel drop in crude stocks for the week ended August 10.
This is in line with the 1.4 million-barrel drop for the week ended August 3, which put crude inventories at 407.4 million barrels. Expectations of this week's drop resumes the inventory decline trend begun in mid-May, interrupted by a 3.8 million-barrel build the week ended July 27.
For the week ending August 3, inventories declined by 600,000 barrels at Cushing, Oklahoma, the delivery point for NYMEX crude futures.
US refiners have been operating near peak capacity, especially in the Midwest, where refiners were at 99.4% of capacity the week ending August 3. Midwest cracking margins for Bakken have topped $16.00/b so far in August.
Midwest crude runs should decline starting in September and October, when BP brings its 413,500 b/d Whiting, Indiana, refinery down for maintenance. But no major refinery maintenance is planned for US Gulf Coast refiners in the second half of this year.
US Gulf Coast refinery utilization rose 2.7 percentage points to 97.3% the week ended August 3, supported by strong export pull which pushed refined product exports up 174,000 b/d to 5.2 million b/d.
US crude exports also rose, up 707,000 b/d to 1.85 million b/d the week ending August 3. Platts cFlow trade-flow software shows an increase in exports for the week ending August 10, with a big jump in crude to Canada balancing a drop off in crude exports to Asia.
China has not been importing US crude lately because of the US-China trade war. China is threatening to slap a 25% tariff on petroleum imports from the US.
But exports to Japan and Singapore have picked up, while exports to the Middle East have been steady.
Also, market sources said more US crude is heading to India in the second half of this year, which should help displace any barrels not sent to China.
Northwest European refining margins are strong, and US crudes are competitive. The NWE Light Houston Sweet cracking margin averaged $9.64/b so far in August, compared to a $8.71/b average for Brent and a $8.72/b average for Azeri Light, Platts data shows.
In refined products, analysts polled by Platts were looking for US gasoline inventories to have declined by 1.0 million barrels the week ending August 10, and distillate inventories to have risen by 250,000 barrels as US economic growth supports higher demand for refined products.
