OPEC Monthly Oil Market Report – October 2017
The Winter Product Markets Outlook
Oil product markets in the major consuming
regions performed well this summer, favoured by
the seasonally-higher gasoline demand. US
refinery markets averaged as high as $20/b by the
end of the summer, representing an improvement
over the same period last year and close to the
high levels seen in July 2015 (
markets in Europe were also healthy, supported by
the strengthening middle distillate complex, as well
as planned maintenance. Meanwhile, a slight
improvement was observed in the Asian market
due to continued healthy demand in the region this
year. In terms of individual products, the gasoline
market performed better this summer compared to
Graph 1: Refinery margins
the same period last year. Healthy demand along with arbitrage volumes heading to the US Atlantic
Coast supported the refinery margins. Middle distillates also improved, boosted by healthy economic
Looking ahead to the coming quarters, crack spreads tend to peak during the driving season and then
drop into the fourth quarter, as lower gasoline demand outweighs the pick-up in distillate consumption
from colder weather. Last year, the warmer-than-normal winter weather particularly weighed on product
markets. In contrast, the current forecast for this year expects winter temperatures to be colder than last
year, leading to higher consumption in distillates, which include heating oil.
With the market moving into the winter season,
distillate fuel supplies are notably tight,
representing a change from the excess supplies
seen in the last two years. US distillate inventories
started 2017 above the five-year range but have
since fallen below the five-year average (
As noted in last month’s Feature Article, disruptions
caused by Hurricane Harvey have deepened the
already steady drawdown in US distillate stocks.
Although daily refinery margins fell back from a
spike to $26.20/b, they still remained around $12/b,
well above the $6-7/b level seen over the same
period last year.
Graph 2: US weekly distillates inventories
An additional factor supporting middle distillates
has been support from bullish sentiment in the
futures market. Hedge funds have accumulated a
record high heating oil futures positions (
anticipating distillate stocks will remain relatively
tight this winter.
As a result, refinery margins are likely to continue
to see support, remaining at seasonally-high levels.
This, together the ongoing improvement in global
economic activity, should provide support for the oil
market over the winter season.
Graph 3: US heating oil managed money
futures positions, NYMEX
Note: * Based on data for week ending 6 October.
Sources: Argus and OPEC Secretariat.
* Oct 17
1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52
Sources: Energy Information Administration and OPEC Secretariat.
Net long positions
Sources: CFTC and OPEC Secretariat.