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Oil Market Developments
Table 10
Summarized Supply/Demand Balance
m b/d
Growth
1996 1997 1Q98 2Q98 3Q98 4Q98 1998 1998/97
World oil demand 71.3 73.2 74.2 72.1 72.9 74.8 73.5 0.3
Non-OPEC supply 1 46.2 47.3 48.0 47.3 46.4 47.2 47.2 0.0
Balance 25.1 25.9 26.2 24.8 26.5 27.6 26.3 0.3
OPEC crude oil production 2 25.7 27.2 28.4 28.1 27.3 27.2 27.7 0.5
Stock change & misc 0.6 1.3 2.1 3.3 0.8 -0.3 1.4 0.2
1. Including OPEC NGLs.
2. Selected secondary sources.
OPEC crude oil production, according to secondary sources, averaged 27.7m b/d in 1998, being 500,000
b/d higher than the previous year. Thus, as illustrated in Tables 9 and 10, the item 'stock change and
miscellaneous' reached a level of 1.4m b/d, which was 100,000 b/d higher than that of 1997, representing
a slight increase in stock build-up.
Oil Price Movements
The average annual price of the OPEC Reference Basket registered $12.28/b in 1998, its lowest value
since its introduction in 1987. The average monthly price of the Basket went through a continuous decline
in the first quarter to reach $12.41/b in March, its lowest value since 1988 (Table 11 and Figure 1).
The factors that led to this decline were oversupply of physical barrels and lower demand due to the
economic situation in South-East Asia and the mild weather in the northern hemisphere. Fears of the
introduction of increased Iraqi export volumes at a time when there was no sign of production cuts from
OPEC Member Countries put extra pressure on prices. During this quarter there was heavy stock building
in the Atlantic Basin. Refiners utilized the contango in the market to build crude oil stocks, and US refiners
in particular took advantage of the low crude prices and good refiners’ margins to increase their runs
and build product stocks.
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