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OPEC Reference Basket - November 2016

Source: OPEC 11/21/2016, Location: Europe

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The ORB value improved by almost 12% in October, to its highest monthly average since July 2015. It rallied alongside the oil complex starting at the end of the previous month after an OPEC accord was reached in Algiers to support market rebalancing. The ORB value rose to its highest level so far in 2016, before softening toward the end of the month. Consecutive weeks of counter-seasonal declines in US crude oil stocks and hurricanerelated logistical disruptions for US Gulf Coast (USGC) oil facilities - which affected imports - also supported oil prices in October. Healthy northeast Asian oil demand in anticipation of the winter season and firm refining margins helped to elevate Middle East crude benchmark values, which aided the notable increase in the ORB price. Crude demand for Asia also picked up as China ramped up imports.

On a monthly basis, the ORB value surged $4.98, or 11.6%, to average $47.87/b. Compared to the previous year, the ORB value was lower by $12.54, or 24%, to average $39.45/b.

All ORB component values improved over the month, but at much varying levels, with each echoing its relevant benchmark. The 5-14% increase is an unusually wide range. Middle East crude benchmarks witnessed a notable uplift in value amid firm demand, while the North Sea benchmark saw a lower increase due to oversupply. The US benchmark was supported by notable US stocks draws.

The major crude oil benchmarks - namely Dated Brent, WTI and Dubai spot prices - all improved in October by $3.05, $4.73 and $5.27, respectively. The healthy crude oil demand in the Asian market - which was reflected in the flattening of the Dubai contango structure - lent support to the Middle Eastern spot components as well as multi-destination grades. Arab Light, Basrah Light, Iran Heavy and Kuwait Export, which are sold to multiple regions and priced on a weighted average basis linked to sales destinations, increased $5.55 on average, or a hefty 13.3%, to $47.35/b for the month. Similarly, the Middle Eastern spot components, Murban and Qatar Marine, saw their value improve, on average, by $4.70, or 10.4%, to $49.66/b. The increase in their pricing formula (OSPF) offsets for October loading also helped. Firm refining margins and northeastern Asian winter demand supported December-loading Mideast Gulf crudes prices. Qatari medium sour firmed to a premium to Dubai for the first time in four months. Tighter sour crude supply in the Mediterranean region has supported medium sour Mideast Gulf crudes delivered to Europe.

Latin American ORB components were up the most in October thanks to a bullish US market due to lower crude inventories and some logistical constraints. Latin American sour grades were also supported by lower supply of Colombian heavy sour Vasconia as the force majeure at the Cano Limon-Convenas pipeline continued. Venezuela’s Merey and Ecuador’s Oriente increased by $4.98, or 13.3%, and $4.76, or 11.5%, respectively, to average $42.36/b and $45.98/b.

The light sweet crudes from Africa saw the least improvement. This was mainly attributed to the less strong performance of the Dated Brent market given the continued regional and local oversupply in the North Sea physical market. The reduced OSPF offsets for the month of October also negatively affected these grades. This was despite healthy demand for West African barrels to Asia, particularly to China and India. The narrow Brent-Dubai spread over the month also opened arbitrage opportunities to the Asian Pacific region. The value of West and Northern African light sweet Basket components - Saharan Blend, Es Sider, Girassol, Bonny Light and Gabon’s Rabi – edged up $2.83 or 6.1%, on average, to $49.38/b.

Indonesian Minas was up significantly amid good demand for Asia-Pacific light sweet crudes due to healthy gasoline and naphtha margins. The grade was 12.2%, or $4.92, higher for the month at $45.20/b.

On 10 November, the ORB stood at $42.67/b.

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