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Crude Oil Price Movements

OPEC Monthly Oil Market Report – November 2017

1

Crude Oil Price Movements

The OPEC Reference Basket averaged $55.50/b in October, gaining $2.06 over the previous month and

reaching the highest value in more than two-and-a-half years, with a year-to-date average of $50.68/b.

Throughout the month, prices were supported by rising global demand and expectations that OPEC and

other participating non-OPEC producing countries would extend the agreement to adjust output and bring

forward the oil market rebalance. OPEC and participating non-OPEC countries’ production adjustment

conformity levels have remained over 100% for the first ten months into their 18-month agreement. The

physical crude oil market was also very strong over the month, particularly for the Middle East crudes.

Crude futures also reached levels not seen since mid-2015. ICE Brent ended $2.13 higher at $57.65/b,

while NYMEX WTI increased $1.72, reaching $51.59/b. Y-t-d, ICE Brent is $9.06, or 20.6% higher at

$53.04/b, while NYMEX WTI rose by $7.23, or 17.1%, to $49.60/b. The ICE Brent/NYMEX WTI spread

widened by 42¢ or 7.4% to $6.05/b, its widest since mid-2015, keeping US crude as the most attractive

grades for arbitrage into both Europe and Asia. Higher Cushing stocks hit WTI and pressured prices, while

Brent prices have been boosted by tighter supplies.

Hedge funds raised net long positions in NYMEX WTI futures and options by 29,456 contracts to

281,244 lots, the highest level since mid-April. In ICE Brent, money managers increased net long positions

in futures and options by 21,592 contracts to 530,237 lots, the highest ever recorded.

Brent and Dubai remained in backwardation, while WTI contango eased. The sweet/sour differentials in Asia

and Europe narrowed in all markets, amid tighter supplies and healthy demand for sour grades, while lighter

grades came under pressure from arbitrage flows from the US.

OPEC Reference Basket

Amid continuing bullish oil market fundamentals,

the

ORB monthly value

firmed above $55.50/b in

October to its highest in almost two-and-a-half

years. Throughout the month, prices have been

bolstered by rising global demand and expectations

that OPEC and other producing countries would

extend a deal to adjust output. The ORB increased

for the fourth consecutive month, improving by

almost 4% to remain above the key $50/b, y-t-d.

Oil prices persisted in October as the ongoing

bullish market sentiment due to improving market

fundamentals, was fuelled further by indications

from key OPEC Members, Russia and other

exporters that they support extending the 1.8 mb/d

production adjustment to rebalance the oil market.

OPEC and the participating non-OPEC countries’

production adjustment conformity level remains

over 100% for ten months into the 18-month

Graph 1 - 1: Crude oil price movement

agreement. The potential return of a geopolitical premium in the Middle East is also seen to support prices.

Moreover, US crude stocks have continued to fall over the month as imports fell and exports surged, bringing

the cumulative US crude stock draw to just under 10 mb in October. The draws are particularly impressive

when compared with seasonal norms that show the five-year average US crude stock build for October at

16 mb and last year’s monthly build at 19.7 mb.

M-o-m, the

ORB value

rose $2.06, or 3.9%, to settle at $55.50/b on a monthly average. Compared to the

previous year, the ORB value was 28%, or $11.23 higher, at $50.68/b.

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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

Nov 17

US$/b

US$/b

OPEC Basket

WTI

Brent Dated

Sources: Argus Media, OPEC Secretariat and Platts.