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Product Markets and Refinery Operations

64

OPEC Monthly Oil Market Report – September 2017

European market

Product markets in

Europe

exhibited a positive performance in August, with all product cracks registering

gains m-o-m, with the exception of fuel oil.

Graph 6 - 4: Rotterdam crack spread vs. Brent

The light-distillate

naphtha

crack against Brent increased by $0.6/b, reaching minus $0.7/b. A rise in the

naphtha crack spread in August was underpinned by the strength of reforming spreads and open arbitrage

opportunities from Europe to Latin America, as a result of shortages caused by Hurricane Harvey in the Gulf

of Mexico. The upward path in naphtha crack performance was also encouraged by outages at the 0.4 mb/d

Shell Pernis refinery towards the end of July.

The

gasoline 98 RON

crack spread against Brent railed in August, gaining $1.7/b from the previous month

to average around $23.5/b. The main supporter for

gasoline

crack spreads in Europe originated from the

arbitrage volumes heading to the US Atlantic Coast as Tropical Storm Harvey shut-in substantial refining

capacity, reducing the supply of gasoline. Latin America was another destination for European gasoline.

Arbitrage volumes increased during the month of August, as the supply to Latin America from the US abated

due to shortages.

The European

gasoil 10 ppm

crack spread against Brent crude at Rotterdam averaged around $13.0/b in

August, adding more than $0.7 compared with the previous month’s level. Lower diesel flows from the USGC

and healthy domestic demand supported the crack spread during the month. The European

jet/kero

crack

spread against Brent crude at Rotterdam averaged around $14.1/b in August, adding more than $1.4/b

compared with the previous month’s level on continuing solid demand and tighter overall supply.

At the

bottom of the barrel

, the NWE

fuel oil crack for 1% sulfur

shed some $1.5/b compared with the

previous month to average around minus $5.0/b in August. The decline is a result of seasonally slower

domestic demand and weaker export volumes to Asia.

-20

-10

0

10

20

30

-20

-10

0

10

20

30

Aug 16

Sep 16

Oct 16

Nov 16

Dec 16

Jan 17

Feb 17

Mar 17

Apr 17

May 17

Jun 17

Jul 17

Aug 17

US$/b

US$/b

Premium gasoline

Jet/Kerosene

Gasoil

Fuel oil

Sources: Argus Media and OPEC Secretariat.