Although the global economic growth has been mixed with key economies like the U.S revising growth forecastsÔÇöthere is hope as there are green shoots of recovery that would see demand for oil rebounding this year.
The Organisation of the Petroleum Exporting Countries (OPEC) said on its Monthly Oil Market report for May that world oil demand in 2015 is now projected to rise at a slightly higher 1.18 (millions of Barrels per Day) mb/d, compared to growth of 0.96 mb/d in the previous year.
OPEC Reference Basket rose in April to its highest value this year supported by various bullish factors. The body that ensures the stabilisation of oil markets said the basket increased $4.84 to $57.30/b, although remaining considerably lower y-o-y. ICE Brent contract rose $4.20 to $61.14/b and Nymex WTI jumped $6.77 to $54.63/b.
However, demand could be affected by revisions to key global economies that give direction to world GDP output including the United States.
“In the OECD countries, the US ÔÇô as in the previous year ÔÇô has seen unexpectedly lower growth in the first quarter, which is now seen growing by only 0.2% in the quarter. If the latest information regarding the increase in trade deficit ÔÇô released after the 1Q15 GDP growth ÔÇô is taken into consideration, growth in the first quarter is likely to be revised even lower,” said OPEC.
The US GDP growth for 2015 is now forecast at 2.6 percent, having previously stood at 2.9 percent. In the Emerging Markets, despite recent data, China is expected to manage its forecast GDP growth of around 7% for 2015 ÔÇô with the Secretariat’s figure currently at 6.9% ÔÇô given recent monetary stimulus, such as the decrease in the required reserve ratio for banks, as well as interest rates.
“At the same time, some countries in the Euro-zone, Africa, and Other Asia, as well as India and even Japan later on in the year, have potential to further support economic growth in 2015,” OPEC said.
“Despite the slow start in some countries, world economic growth could strengthen further as the year progresses, leading to an improvement in crude oil demand in 2015,” it added.
The growth in oil demand will be good for exporting countries, but bad for net importers like Botswana.
The World Bank commented at the time that the decline in oil prices reflects a confluence of factors, including several years of upward surprises in oil supply and downward surprises in demand, receding geopolitical risks in some areas of the world, a significant change in policy objectives of the OPEC and appreciation of the U.S. dollar.
“For many oil-importing countries, lower prices contribute to growth and reduce inflationary, external, and fiscal pressures,” the bank said.
The Botswana consumers are paying 60 thebe less for petrol, farmers are enjoying themselves as prices for diesel 500ppm went down by 60 thebe per litre and retail prices for diesel 50ppm have gone down by 50 thebe per litre.
“The lower oil price has benefited consumers through a stable petrol price. The last time the government had to raise the retail prices of petrol, paraffin and illuminating paraffin was in 2012,” Tshephang Loeto an analyst at Investec said.
The Non-OPEC oil supply growth in 2015 is expected to grow by 0.68 mb/d, compared to an increase of 2.17 mb/d in the previous year. OPEC NGLs are expected to grow by 0.19 mb/d in 2015, following growth of 0.18 mb/d last year. In April, OPEC crude oil production increased by a marginal 18 tb/d to average 30.84 mb/d, according to secondary sources.
The demand for OPEC crude in 2015 is expected at 29.3 mb/d. This follows a slight upward adjustment from the previous month and represents a gain of 0.3 mb/d over the estimate for 2014 of 29.0 mb/d.
MarketWatch reported that on Friday, the Brent crude for June delivery LCOM5, -0.34% traded broadly flat at $66.70 a barrel on London’s ICE Futures exchange. On the New York Mercantile Exchange, light, sweet crude futures for delivery in June CLM5, -0.28% was recently trading down 0.3% at $59.68 a barrel.