Monthly Oil Market Report
O P E C
11 October 2017
The WinterProduct Markets Outlook
OPEC bulletin 10/17
The winter product
formed well this summer, favoured by the seasonally-
higher gasoline demand. US refinerymarkets averaged
as high as $20/barrel by the end of the summer, rep-
resenting an improvement over the same period last
year and close to the high levels seen in July 2015.
Product markets in Europewere also healthy, sup-
ported by the strengtheningmiddle 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 mar-
ket performed better this summer compared to the
same period last year. Healthy demand along with
arbitrage volumes heading to the US Atlantic Coast
supported the refinerymargins. Middle distillates also
improved, boosted by healthy economic activity.
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 consump-
tion from colder weather.
Last year, the warmer-than-usual winter particu-
larly weighed on product markets. In contrast, the
forecast for this year indicates that winter tempera-
tures will be colder than last year, leading to higher
consumption of distillates, including 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
f i v e - y e a r
f a l l e n
As noted in last month’s
cle, disruptions caused by Hurricane Harvey have
deepened the already steady drawdown in US distil-
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. An additional factor supporting middle dis-
tillates has been support from bullish sentiment in
the futures market.
Hedge funds have accumulated a record high
heating oil futures positions, anticipating that distil-
late stocks will remain relatively tight this winter.
As a result, refinery margins are likely to continue
to be supported, 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.
M a r k e t R e v i e w