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Product Markets and Refinery Operations

OPEC Monthly Oil Market Report – August 2017

59

European market

Product markets in

Europe

exhibited mixed performance in July; while middle distillate crack spreads were

strengthening, those for gasoline and fuel oil were weakening.

Graph 6 - 4: Rotterdam crack spread vs. Brent

The light distillate

naphtha

crack increased against Brent by $0.5/b to reach minus $1.22/b. The increase in

July mainly reflects an improvement in overall demand for the product, as naphtha crackers returned from

maintenance and export opportunities to the Asia Pacific region inched up above June levels.

The

gasoline

crack spread against Brent saw a drop of more than $4 from the previous month to average

around $17.4/b. The

gasoline

market continued weakening in July as regional oversupply outweighed

seasonal demand, increased feed stock costs m-o-m and closed arbitrage to the US, thus reducing export

opportunities.

The European

gasoil

crack spread against Brent crude at Rotterdam averaged around $12.3/b in July,

adding more than $1.7 versus the previous month’s level. The gasoil market withstood higher feedstock

costs m-o-m due to solid domestic demand, especially in Russia, and refinery outages, which rose towards

the end of the month. This kept the county’s exports low for several months.

At the

bottom of the barrel

, the NWE fuel oil crack lost almost $0.8 compared with the previous month to

average around minus $3.5/b in July. The decline is a result of slower domestic demand and easing export

volumes to Asia. Both of these factors added to a reported accumulation of Amsterdam-Rotterdam-Antwerp

(ARA) inventories to their highest levels since April. The crack is anticipated to continue to decline further as

a result of slower global demand.

-20

-10

0

10

20

30

-20

-10

0

10

20

30

Jul 16

Aug 16

Sep 16

Oct 16

Nov 16

Dec 16

Jan 17

Feb 17

Mar 17

Apr 17

May 17

Jun 17

Jul 17

US$/b

US$/b

Premium gasoline

Jet/Kerosene

Gasoil

Fuel oil

Sources: Argus Media and OPEC Secretariat.