Crude Oil Price Movements
OPEC Monthly Oil Market Report – August 2017
The futures market structure
narrowed in all markets, verging on sustained backwardation, as the oil glut started
to ease. The narrowing contango removed the financial incentive for traders to store barrels, a factor likely
contributing to the drawdown of stocks witnessed during the month. Further declines in US crude stocks are
likely, given the record rates at which US refineries are running, while gasoline demand sparked into life after
a sluggish first quarter. Refinery throughput rose by 123 tb/d to 17.41 mb/d in the week ending 28 July, the
second-highest figure on record, according to the US Energy Information Administration (EIA). Gasoline
product supplies rose w-o-w to 9.84 mb/d, also the second-highest level on record. This shift in the oil
complex momentum came after OPEC officials indicated they would move their focus to limiting exports. The
entire forward curve has flattened for Brent, amid some bullish indicators in the physical market. Crude
differentials strengthened notably for a range of key grades in the Mediterranean, North Sea and West
African markets. A tighter Atlantic Basin could present more export possibilities for US crude producers who
already have their eyes trained on global markets, given the premium that Brent and Dubai enjoy over WTI.
The Dubai M1 59¢/b discount to M3 decreased to 52¢/b. The North Sea Brent M1/M3 discount also
narrowed to 40¢/b on average from around 60¢/b the previous month. In the US, the WTI contango eased by
11¢/b as WTI’s (M1–M3) narrowed further to 34¢/b.
Graph 1 - 4: NYMEX WTI and ICE Brent forward curves
ICE Brent/NYMEX WTI spread
widened despite successive weeks of US crude stock draws. Tightening
fundamentals and the clearing of floating storage in the North Sea supported the Brent market. This
somewhat wider spread, coupled by recent multiyear strength in the European sour market, has potentially
opened up arbitrage to send competing US medium sour grades such as Mars and Southern Green Canyon
into Europe. It is clear that the global medium heavy sour crude market has tightened and that US sour
exports have already gained market share in Asia. The first-month ICE Brent/NYMEX WTI spread widened
to $2.47/b, a 12¢/b expansion.
Table 1 - 3: NYMEX WTI and ICE Brent forward curves, US$/b
1FM 2FM 3FM 4FM 5FM 6FM 7FM 8FM 9FM 10FM 11FM 12FM
ICE Brent: 26 Jun 17
ICE Brent: 26 Jul 17
NYMEX WTI: 26 Jun 17
NYMEX WTI: 26 Jul 17
Note: FM = future month.
Sources: CME Group, Intercontinental Exchange and OPEC Secretariat.
6FM 12FM 12FM-1FM
26 Jun 17
26 Jul 17
26 Jun 17
26 Jul 17
Note: FM= future month.
Sources: CME Group and Intercontinental Exchange.