EDITORIAL: Oil Price Review

• Published date: 01 July 2017
• Date: 01 July 2017
• DOI: http://doi.org/10.1111/oet.12491

OIL PRICE REVIEW

Second Quarter 2017

Dated Brent crude 31 March close: $52.20 per barrel

1-7 April Friday close: $54.24

Oilmarketsbeganthesecondquarterinastateofbullish,

if slightly nervous optimism. OPEC members continued

to trumpet their successes in reducing outputin line with

their agreement of November 30, and their principal

Non-OPEC ally, Russia, claimed it was well on the way to

complying with its own commitment.ere was furt her

price support from reports that exports from Libya had

been reduced by renewed unrest aecting the 350,000

bpd al-Sharara eld. Demand meanwhi le remained rm,

especially in markets east of Suez, helping prices of both

Middle Eastern and African crudes. ere were never-

theless one or two worr ying signs that ought to have wor-

ried the bulls. Despite the production cuts from OPEC,

crude oil was generally in good supply, thanks to sales

from storage by some oil pro ducers, whilst in the US,

production and inventories of crude were ris ing.

8-14 April Thursday close: $55.05

Futures markets were clos ed for the Good Friday holi day

and trading in other crudes wound down in advance

of the Easter holidays across the Atlantic Basin. OPEC

countries continued to talk-up prices by hinting at an

extension of their production cuts beyond their planned

expiry on June 30. Rising tension in Libya and Syria

helped to lend a bullish tone to global crude markets, as

did a weak dollar.A ll the while, though, stocks remained

high, as did US oil production.

15-21 April Friday close: $49.93

In the absence of further positive news for crude prices,

itrapidlybecameevidentthatcrudemarketswereover-

bought, and prices began falling at the start of the trad-

ingweek,pickingupmomentumastradersreturned

to their desks following the Easter break. Both crude

and product stock levels indicated a global market that

was comfortably, if not well supplied. For sweet crudes,

the market could with some justication be described

as being in surplus thanks to rising supply levels from

the North Sea, West Africa, and the US: and sour

crudes were not exactly scarce, either, with good vol-

umes reporte d available from Russia and pa rts of the Per-

sian Gulf. Demand was generally l ackluster and product

pricesreactedbyfalling.

22-28 April Friday close: $49.46

Crude oil prices rallied early in the week on rumors that

OPEC was planning to extend production cuts aer the

end of June; but in the absence of any rm details, prices

began to fall once more, ending the week little changed.

Several sour crudes were nevertheless said to be in short

supply as a result of the existing output cuts, but there

appeared to be no shor tage of sweet subst itutes from

the North Sea, West Africa, the Caspian, and the US,

where rising production was reected in an increase in

crude oil exports. ere were even some additional sour

barrels available from Latin America andRussia. Libya’s

National Oil Company (NO C) announced that there

would soon be up to 200,000 bpd of additional crude

exports available thanks to a deal with armed militias

toallowproductiontore-startattheal-Shararaand

al-Fil elds. ere was good news for naphtha sellers

as Asian cracker operators returned to the market and

began seeking suppl ies from outside the region as well

as locally.

1-5 May Friday close: $47.45

eweekstartedwellforsellersofsweetcrudeasprompt

Brent futures climbed above $51.50/bbl, only to fall by

$2.32 by the end of the week. e early rally was based

on more talk of an extension of the OPEC/Non-OPEC

output deal, but with little of real substance to go on,

crude oil traders began to mark down price levels. Stocks

remained stubbor nly high and there were plenty of swe et

crudes around to oset t he fall in Persian Gulf sours

resulting from production cuts there. India, a major

buyer of Middle Eastern crude, turned to Russian Urals

to help ll the gap le by lower Gulf production. US pro-

duction, much to the cha grin of OPEC, carried on risi ng,

while its principal foreignsupplier, Canada, upped its US

deliveries. European product prices, led by middle dis-

tillate, fell. erewas a similar pattern in North America

and Asia. Naphtha fell in most markets on weak petchem

numbers and low gasoline demand.

8-12 May Friday close: $49.08

Prices began the week by driing downwards but turned

around midweek following a larger than expected

crude stockdraw in the US, which pushed Brent

prompt-month future back about $50/bbl, where it

remained for the remaind er of the week, buoyed by

increasing chatter from OPEC’s members about rolling

over their production agreement. Sweet crude prices

remained rm on good demand from the Mediterranean

and Asia. Strengthening fuel oil prices supported heavy

sour crude values.

13-19 May Friday close: $52.78

Brent prices soared by $3.70/bbl as Russia joined OPEC

in calling for an extension of their combined output

deal and agreement appeared to have been reached on

prolonging the cuts for nine m onths from July 1. Figures

from OPEC suggested that Angola, Iran, Kuwait, and

Saudi Arabia had reduced their production by more

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