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Crude Oil Price Movements

OPEC Monthly Oil Market Report – August 2017

3

ORB component values

improved along with relevant crude oil benchmarks and monthly changes in

respective official selling price (OSP) differentials. Physical crude oil benchmarks, namely Dated Brent, WTI

and Dubai spot prices, increased in July by $2.09/b, $1.50/b and $1.21/b, m-o-m, respectively.

Latin American ORB component Venezuelan Merey edged up 92¢, or 2.2%, to $43.41/b in July. Ecuador’s

Oriente also rose by $2.10, or 4.9%, to $45.21/b. Amid improving price differentials for light sweet crude

Basket components from West and North Africa, values improved alongside crude benchmark Brent outright

prices. Saharan Blend, Es Sider, Girassol, Bonny Light, Equatorial Guinea’s Zafiro and Gabon’s Rabi values

increased by $2.06/b on average, or 4.5%, to $48.01/b. Physical crude differentials for these grades were

firm on higher demand from China and turbulence in supplies. Booming refinery profits are helping West

African oil producers sell cargoes at higher values, aided by a shortage in certain types of crude amid OPEC

production adjustments and geopolitical turbulence. The value of multiple-region destination grades Arab

Light, Basrah Light, Iran Heavy and Kuwait Export rebounded, supported further by an uplift in OSP offsets

and support from healthy global sour markets. On average, values for these grade expanded by $1.75/b for

the month, or 3.9%, to $46.44/b. Middle Eastern spot components Murban and Qatar Marine saw values

improve by $1.18/b, or 2.5%, to $48.24/b.

On 9 August, the ORB stood at $50.47/b, over $3.54 above the July average.

The oil futures market

Oil futures

in New York and London recovered in July, with both ending the month above $50/b, supported

by falling inventories, higher demand and stronger refining margins. Prices improved as OPEC and non-

OPEC countries continued to comply with output adjustments and US stocks declined further, providing more

evidence of global destocking. OPEC producers participating in the November in the November Ministerial

decision successfully implemented 100% of the planned output adjustments in the six months from January

to June. US commercial crude stocks fell for four consecutive weeks in July owing to high refinery runs.

Crude oil inventories have dropped by 56 mb since 1Q17, with around 24% of the draw taking place at the

WTI futures delivery point of Cushing, Oklahoma, where stocks are at their lowest in 20 months. Firming

fundamentals are also drawing crude from floating storage in the Atlantic Basin. Bullish product demand

supported the overall oil complex, as US gasoline futures made a significant gain over the month, providing

further support to crude prices. Short covering in the September contract also contributed to the rally in oil

futures. Price support has also come from a fall in Nigerian production of about 150 tb/d after a disruption in

the Trans Niger pipeline and indications that some US producers are adjusting their spending plans. July

saw some additional weakness in the US dollar, ongoing strengthening in refining margins and improved

perceptions of solid end-user demand, as well as encouraging economic indications regarding China via

rising copper prices. The US dollar index is currently at its lowest level since June of last year. Drilling for

new production in the US is also slowing down, with just 10 rigs added in July, the fewest of any month since

May 2016.

ICE Brent

ended July $1.59, or 3.4% higher, to stand at $49.15/b on a monthly average basis, while

NYMEX WTI

increased by $1.48, or 3.3%, to $46.68/b. Y-t-d, ICE Brent was $10.23, or 24.4% higher, at

$52.18/b, while NYMEX WTI rose by $9.03, or 22.3%, to $49.50/b.

Table 1 - 2: Crude oil futures, US$/b

Crude oil futures prices improved in the second week of August. On 9 August, ICE Brent stood at $52.70/b

and NYMEX WTI at $49.56/b.

Short covering in July, rather than long building, drove oil prices higher, which suggests fund managers are

becoming less bearish about prices rather than more bullish. Hedge funds reduced their aggregate short

Jun 17

Jul 17

Jul/Jun

%

2016

2017

NYMEX WTI

45.20

46.68

1.48

3.3

40.47

49.50

ICE Brent

47.55

49.15

1.59

3.4

41.96

52.18

Transatlantic spread

2.36

2.47

0.12

0.08

1.49

2.69

Note: Totals may not add up due to independent rounding.

Change

Year-to-date

Sources: CME Group, Intercontinental Exchange and OPEC Secretariat.