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Crude Oil Price Movements

6

OPEC Monthly Oil Market Report – October 2017

The Dubai market structure was in backwardation over most of August and September, during which period

differentials for some Middle Eastern crudes reached their highest premiums against Dubai in months, which

suggests that refiners drew down some of the massive stocks they had built up. The backwardation in the

Dubai markets enticed further commercial refinery crude stock draws in China, a trend that has continued in

September.

The Dubai M1 8¢/b discount to M3 flipped into a premium of 24¢/b, improving 32¢. The North Sea Brent

M1/M3 30¢ backwardation strengthened to 56¢/b, a 26¢ improvement. In the US, the WTI contango

worsened by 35¢ as WTI’s (M1-M3) widened to 80¢/b.

The NYMEX WTI crude front month discount to the same month of ICE Brent futures fell to $5.64/b, its

lowest since August 2015, making US crude the most attractive grade for arbitrage into both Europe and

Asia. Hurricane damage to US refineries hit demand for WTI and pressured prices, while Brent prices were

boosted by OPEC and non-OPEC producers’ output adjustments, maintenance to North Sea oil fields and

strengthening demand in Europe for distillates. With this large gap in the price of a barrel of US WTI crude

and Brent, the international benchmark, US oil exports rose to an all-time high of 1.98 mb/d in the last week

of September, surpassing the previous record of nearly 1.5 mb/d that was seen during the previous week.

This has also created an opportunity for USGC condensate, such as Eagle Ford, to find its way into the

Asian market. This increasing arrival of arbitrage crude is set to put significant pressure on locally-sourced

grades. The first-month ICE Brent/NYMEX WTI spread widened to $5.64/b in September, a $1.83, or 48%,

expansion.

Table 1 - 3: NYMEX WTI and ICE Brent forward curves, US$/b

1FM

2FM

3FM

6FM 12FM 12FM-1FM

NYMEX WTI

25 Aug 17

47.87

48.12

48.34

48.83

49.15

1.28

25 Sep 17

52.22

52.52

52.74

52.86

52.28

0.06

Change

4.35

4.40

4.40

4.03

3.13

-1.22

ICE Brent

25 Aug 17

52.41

51.98

51.89

52.07

52.46

0.05

25 Sep 17

59.02

58.43

58.03

57.40

56.50

-2.52

Change

6.61

6.45

6.14

5.33

4.04

-2.57

Note: FM= future month.

Sources: CME Group and Intercontinental Exchange.