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Monthly Oil Market Report

O P E C

11 October 2017

Feature article:

The WinterProduct Markets Outlook

Oilmarkethighlights

Featurearticle

Crudeoilpricemovements

Commoditymarkets

Worldeconomy

Worldoildemand

Worldoilsupply

Productmarketsand refineryoperations

Tankermarket

Oil trade

Stockmovements

Balanceofsupplyanddemand

i

iii

1

9

12

32

43

60

65

69

77

84

83

OPEC bulletin 10/17

October

2017

The winter product

markets outlook

Oilproductmarketsinthemajorconsumingregionsper-

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

range but

have since

f a l l e n

below the

five-year

average.

As noted in last month’s

MOMR

feature arti-

cle, disruptions caused by Hurricane Harvey have

deepened the already steady drawdown in US distil-

late 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. 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