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Crude Oil Price Movements

OPEC Monthly Oil Market Report – October 2017

7

The light sweet/medium sour crude spread

The sweet/sour differentials in Asia and Europe widened significantly in all markets, as outright prices from

light sweet Brent improved markedly compared to sour grades. In the USGC, the spread remained

unchanged for the second consecutive month.

In

Asia

, the Tapis premium over Dubai increased for the fourth month in a row, despite ongoing lower sour

crudes supplies. The spread widened as the Brent/Dubai spread increased further to climb above $2.50/b,

which further slowed the west-east arbitrage movement for Atlantic Basin crudes. This made the domestic

Asian grade more attractive despite the arbitrage flows of light sweet and condensate barrels from the USGC

to Asia. The lack of arbitrage flows from the northern Atlantic Basin helped Asian-sourced grades perform

well on the spot market as refiners increased their intake. Higher crude differentials for West African crudes

also made them less attractive to Asian buyers. Moreover, the continuing healthy demand for Asia Pacific

light sweet crudes amid firm refining margins in Asia and the brief requirement for refined products to export

to the US as a result of Hurricane Harvey supported the trend. Condensate pricing also firmed on steady

demand coupled with supply issues. The shorter supply picture came from news that the Iranian South Pars

field has to undergo unplanned maintenance in October as well as less Qatari condensate being offered in

recent months. This has created an opportunity for USGC condensate, such as Eagle Ford, to find its way

into the Asian market.

The Tapis/Dubai spread widened by $1.32 to $4.76/b. The Dated Brent/Dubai spread widened, improving by

$1.40 to the advantage of Brent, at a $2.56/b premium compared with the previous month’s $1.42/b

premium.

In

Europe

, the light sweet North Sea Brent

premium to Urals medium sour crude increased

sharply by 82¢ to $1.18/b, strongly revising the two-

year low premium of the previous month. Urals

price differentials to sour crude in the Atlantic Basin

were marked by the strength of physical Brent.

A considerable decrease in floating storage in the

North Sea and healthy margins fuelled higher

refinery intake. Furthermore, the sweet-sour spread

widened as Urals differentials underwent a

significant downward correction after having almost

reached parity against Dated Brent. This improved

the incentive to process the Russian medium, sour

grade, especially for European and Asian refiners,

but the wider Brent/Dubai spread is set to limit the

ability of arbitrage into Asia.

In the

USGC

, the Light Louisiana Sweet (LLS)

premium over medium sour Mars remained almost

Graph 1 - 6: Brent Dated vs. sour grades

(Urals and Dubai) spread

unchanged at $3.11/b. Meanwhile, USGC crude price differentials to WTI rose sharply after Brent's premium

widened over WTI, with sour grades such as Mars trading at a premium to WTI. Strong exports were also a

driving factor for the increase in certain USGC grades. Additional support for Mars also came from

production disruptions, with BP having closed its Thunder Horse platform, just as some relief was expected

to come from the restart of the 375 tb/d Zydeco pipeline. This follows hurricane-related disruptions earlier in

the month.

-2

0

2

4

6

-2

0

2

4

6

Sep 16

Oct 16

Nov 16

Dec 16

Jan 17

Feb 17

Mar 17

Apr 17

May 17

Jun 17

Jul 17

Aug 17

Sep 17

Oct 17

US$/b

US$/b

Dubai

Urals

Sources: Argus Media, OPEC Secretariat and Platts.