The ORB recovered on bullish market fundamentals in July after two consecutive months of sharp declines. It was up almost 4% m-o-m but y-t-d was slightly below $50/b y-t-d, for the first time this year. The oil complex rebounded on receding fears of oversupply as solid seasonal demand soaked up some of what is seen as a glut on the market. Bullish inventory reports over the month helped confirm the declining trajectory of global inventories. Chinese oil imports in the first half of this year were up almost 14% from the same period in 2016, helping to drain the global fuel glut. US crude oil inventories have fallen by more than 10% from March peaks to 475.4 mb. Drilling for new production in the US is also slowing, with just 10 rigs added in July, the fewest of any month since May 2016. Oil prices have risen nearly 10% since the last meeting of OPEC and non-OPEC major producers, including Russia, when the group discussed potential measures to balance oil markets. Prices were also lifted by short covering.
M-o-m the ORB value rose by $1.72 to settle at $46.93/b, up 3.8%. Compared with the previous year, the ORB value was 33.7% or $12.55 higher at $49.75/b.
ORB component values improved along with relevant crude oil benchmarks and monthly changes in respective official selling price (OSP) differentials. Physical crude oil benchmarks, namely Dated Brent, WTI and Dubai spot prices, increased in July by $2.09/b, $1.50/b and $1.21/b, m-o-m, respectively.
Latin American ORB component Venezuelan Merey edged up 92¢, or 2.2%, to $43.41/b in July. Ecuador’s Oriente also rose by $2.10, or 4.9%, to $45.21/b. Amid improving price differentials for light sweet crude Basket components from West and North Africa, values improved alongside crude benchmark Brent outright prices. Saharan Blend, Es Sider, Girassol, Bonny Light, Equatorial Guinea’s Zafiro and Gabon’s Rabi values increased by $2.06/b on average, or 4.5%, to $48.01/b. Physical crude differentials for these grades were firm on higher demand from China and turbulence in supplies. Booming refinery profits are helping West African oil producers sell cargoes at higher values, aided by a shortage in certain types of crude amid OPEC production adjustments and geopolitical turbulence. The value of multiple-region destination grades Arab Light, Basrah Light, Iran Heavy and Kuwait Export rebounded, supported further by an uplift in OSP offsets and support from healthy global sour markets. On average, values for these grade expanded by $1.75/b for the month, or 3.9%, to $46.44/b. Middle Eastern spot components Murban and Qatar Marine saw values improve by $1.18/b, or 2.5%, to $48.24/b.
On 9 August, the ORB stood at $50.47/b, over $3.54 above the July average.