WASHINGTON (MNI) – The following is the second and final part of
excerpts from OPEC’s Monthly Oil Market Report for May released

World Oil Supply

Preliminary figures indicate that global oil supply experienced a
minor decrease of 60 tb/d in April compared to the previous month. This
was due to a 0.38 mb/d decrease in non-OPEC supply as well as a 0.32
mb/d rise in OPEC crude production. The share of OPEC crude oil in
global production increased to 35.2% in April. The estimate is based on
preliminary data from non-OPEC supply, OPEC NGLs and OPEC production.
Estimates for OPEC NGLs and OPEC production are derived from secondary

Non-OPEC Supply

Non-OPEC supply is expected to increase by 0.64 mb/d in 2012 to
average 53.02 mb/d, representing an upward revision of 50 tb/d from last
month’s report. Updated production data for the first quarter for some
producers was the main driver of the upward revision. The first-quarter
supply figure experienced a significant upward revision, while the rest
of the quarters were revised down. There have been upward and downward
revisions to individual countries’ supply projections. On an annual
basis, the forecasts for four countries required upward revisions, while
those for nine other countries were revised down. However, the upward
revisions were larger in volume than the downward ones.

The overall supply forecast remains relatively stable, with North
and Latin America expected to have the highest growth, followed by the
FSU and China, while supply in Africa, the Middle East and OECD Western
Europe is projected to decline. On a quarterly basis, non-OPEC supply is
seen to average 53.19 mb/d, 52.66 mb/d, 52.88 mb/d and 53.36 mb/d

US Oil Demand

Although there are some signs of economic stabilization within the
US, the country’s economic activity is still having a negative impact on
the use of oil. The most important sector, transportation, continues to
consume less oil than it did last year, due mainly to the country’s
economic activity and high retail prices.

The latest monthly US oil consumption data, for February, shows a
0.6% year-on-year (y-o-y) contraction, the lowest observed since April
2011. Distillate-consumption grew, while the bulk of contractions was
seen in gasoline and fuel oil. The first four months of 2012 were
generally quite disappointing for US consumption, with contractions in
all product categories, especially motor gasoline and residual fuel oil.
The main factors influencing consumption were ongoing economic concern,
relatively high fuel prices and a warmer-than-usual winter.
Nevertheless, the situation showed some improvement in March and April.
As for April, the country’s consumption revealed the first growth since
March 2011, being pushed up by industrial fuel-consumption. However,
high pump prices were the main cause of decreasing transportation fuels.

The outlook for US oil consumption for the entire year remains
rather pessimistic, depending on the development of the economy and
transportation fuel prices.

China Oil Demand

China is considering an alteration to its existing oil product
pricing mechanism. The new mechanism should ease the pressure of the
already high rate of inflation in the country. China adopted the
existing mechanism, which reduced government subsidies, as international
oil prices strengthened over the past few years. The existing mechanism
adjusts domestic prices for certain products, once changes in
international oil prices have been sustained for 22 days, partially
exposing local consumers to international prices affecting domestic
demand as a result.

China’s oil demand growth has been at its weakest level since
September. Demand grew by 1.9% in March, adding 190 tb/d to the
country’s total oil demand. Kerosene, which was affected not only by
prices, but also by a hike in the aviation industry, grew the most in
March, by 39% y-o-y, to average 0.42 mb/d. Despite the turbulence in oil
demand, the country is expected to consume 400 tb/d of extra oil this
year. Although China has been importing much oil, this oil has been
directed to the country’s stockpile, rather than domestic consumption.

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** MNI Washington Bureau: 202-371-2121 **