EDITORIAL: Oil Price Review
| Date | 01 October 2017 |
| DOI | http://doi.org/10.1111/oet.12532 |
| Published date | 01 October 2017 |
OIL PRICE REVIEW
Third Quarter 2017
Dated Brent crude 30 June close: $47.08 per barrel
1-7 July Friday close: $46.47
Reports that OPEC’s production had reache d its high-
est point in the year during June helped to send crude
oil prices lower,reversing the rise that began the week as
buyers of Brent and other North S ea grades pile d in to
secure barrels in advance of mid-summer eld mainte-
nance shutdowns. European renery demand was also
seen as robust, along with that of Asia, whilst in the
USalargestockdrawandafallincrudeoilimports
supported both sweet and sour domestic cr udes. West-
ern Hemisphere sours received further support from a
sharpfallinexportsfromColombia.Anincreaseinlight,
sweet crude supplies from Nigeria and Libya was oset
to some extent by a fall in supplies of some Asian and
Australasian condensates. Most products strengthened
early in the week with European gasoline and f uel oil the
principal exceptions.
8-14 July Thursday close: $47.89
e rst full week in July proved to be the low point
for the entire third quarter in terms of prices. For
Brent prompt-month futures the low came on July 7,
at $46.71/bbl. e following week saw prices rise by
$2.20 to $48.91/bbl on the 14th. Crude prices received
an early boost from rumors that Nigeri a and Libya were
about to join OPEC’s production-shar ing agreement.
Robustdemandandfallinginventorylevelshelpedthe
processalong,asdidaweakerdollar.Highdemandin
Asia for light, sweet cru des and condensate gave support
to North Sea and North and West African crudes, as
well as to Australia’s North West Shelf condensate. Sour
crudes beneted fromthe reduction in exports from the
Persi an Gulf.
15-21 July Friday close: $47.47
Brent spot-month futures went briey above $50/bbl
before falling back at the end of the week. Many traders
sawthemarketasbeingoverboughtat$50andmarked
down prices as a result. Cash markets across the world
followed suit in most cases leaving crude slightly down
on the previous week’s close. e week’s crude buying
was led by reneries in Asia. Sour Persian Gulf grades
strengthened early in the we ek on continuing tight sup-
plieseastofSuez,butanabsolutescarcitywasavoidedas
several Asian reners opted to run light, sweet grades,
such as West African and US grades instead. Asian
buying interest also helped gasoline prices in Europe.
Product prices strengthened across much of Asia on
local shortages.
22-28 July Friday close: $52.00
e main oil markets rose strongly in response to an
announcement by Saudi Arabia’s Oil Minister that the
kingdom would restrict its exports to 6.6mn bpd in
August, 1 mn bpd below the peak of 2016, in sup-
port of the output reductions made by OPEC and its
non-OPEC allies. Brent prompt futures rose above $50
and remained there for the remainder of the quar-
ter. Some short-covering at the end of t he week sealed
the gains, with many crudes at about $4.50/bbl above
their week-earlier levels: the largest weekly gain since
December 2016. For all the above, most major mar-
kets remained well supplied with crude thanks to rising
exportsfromAfricaandtheUS,aidedbylowfreight
rates on many routes. Product prices rose along with
thoseofcrude.Muchoftheactioncenteredongasoil,
especially in Europe, where a fall in Russian exports
because of renery maintenance and in US deliveries to
Europe as supplies were diver ted to Latin America, led to
a tightening in European gasoil supplies just as demand
from Germany was on the r ise.
29 July-4 August Friday close: $52.48
Most crude oil prices remained above $50 on the
strength of reports indicating rising demand and falling
stock levels. e principal exceptions were some heavy
South East Asian sweets and WTI, which just fai led to
make it over the $50 mark. WTI’s weakness was largely
the result of rising US production and a more general
surplus of light, sweet crude across the Atlantic Basin:
andWTI’sweaknessalsokeptdownthepriceofseveral
Western Hemisphere grades, including sour grades
from the US Gulf and Colombia. Elsewhere sours did
fairly well thanks, in part, to fears that US sanctions
on Venezuela’s President, Nicolas Maduro, which were
announcedonJuly31,mighteventuallybeextendedto
cover US imports of Venezuelan crude. e temporary
closureofsomereneriesinAsiaandEuropehelpedto
tighten markets for gasoline and middle distillate.
5-11 August Friday close: $51.47
Rising production from Nigeria and Libya and good
availabilities of other light, sweet grades helped
to put paid to a mid-week rally triggered by a
greater-than-expectedfallincrudeoilstocks.Mar-
ketsbegantomoveintopositiveterritoryoncontinuing
fearsofaUScrudeembargoonVenezuelaandsome
brand new fears of an armed clash bet ween the US and
North Korea as the countries’ two le aders traded insults.
Back in the real world there was good demand for
crude amongst reners, especially on the US Gulf Coast
where runs were high and a fall in West African sweet
crude deliveries to the region led reners to seek out
supplies of Light Louisiana Sweet (LLS), pushing it to its
highest premium of the year against WTI. High-renery
runs caused most US product prices to fall, whilst
rising US product ex ports helped to l ower prices in
Europe.
© 2017 John Wiley& Sons Ltd
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