OPEC Reference Basket - September 2017

Source: OPEC 9/28/2017, Location: Europe

The ORB moved higher for the second consecutive month, up by nearly 6%, the highest monthly percentage gain for the year. Global crude oil prices improved as OPEC and non-OPEC countries continued to conform with voluntary output adjustments and US stocks declined further. Physical crude oil differentials also showed a noticeable improvement due to strong demand, firm refining margins and tight supplies. In addition to seasonal refined product demand, unplanned refinery shutdowns in Europe and the USGC have helped support refining margins globally. Oil field maintenance – as well as diminished supplies of sour crude, particularly in Asia and Europe due to OPEC and non-OPEC production adjustments, which mostly affects sour grades – underpinned physical crude oil values. US crude oil stocks levels fell significantly over the month amid higher refinery throughput as well as increases in US exports due to favourable arbitrage economics. During the week of 25 August, US stock draws continued for the ninth consecutive week, with stocks falling 5.4 mb w-o-w, US exports also continued at significant levels, particularly to Asia, replacing lower OPEC sour crudes supplies to the region and capitalising on the record-breaking Brent/WTI gap, which favoured sweet crude arbitrage from the US to Asia. Sweet crudes in Asia are priced against Brent, so a wider Brent/WTI spread makes these grades more expensive relative to US crudes, which are priced against WTI. Over the month, US exports averaged around 0.9 mb/d.

The ORB value rose m-o-m by $2.67 to settle at $49.60/b on average in August, up 5.7%. Compared with the previous year, the ORB value was 30.9% higher or $11.74, at $49.73/b. ORB component values improved along with relevant crude oil benchmarks and monthly changes in respective official selling price (OSP) differentials. Crude oil physical benchmarks, namely Dated Brent, Dubai and WTI spot prices, increased in August by $3.15/b, $2.65/b and $1.36/b, respectively.

Continuing improvements in price differentials, coupled with an uplift in crude benchmark Brent outright prices, supported light sweet crude Basket components from West and North Africa to prices above $50/b. Saharan Blend, Es Sider, Girassol, Bonny Light, Equatorial Guinea’s Zafiro and Gabon’s Rabi values increased by $3.32/b on average, or 6.9%, to $51.33/b. Physical crude differentials for these grades improved on higher demand from Asia, particularly China and India. Booming refinery profits are helping West African oil producers to sell cargoes at higher prices, aided by a shortage in certain types of crude amid OPEC production adjustments and geopolitical turbulence.

Tropical Storm Harvey caused in a shortage of refined products in the US, which also supported margins and increased demand for West African gasoline- and distillate-rich crudes. At least 3.6 mb/d of refining capacity was offline in Texas and Louisiana, or nearly 20% of total US capacity. Restarting plants even under the best conditions can take a week or more. As a result of the outages, major pipelines carrying gasoline, diesel and jet fuel started to adjusted deliveries or closed lines outright because of a lack of supply.

Latin American ORB components Venezuelan Merey and Ecuador’s Oriente edged up to $45.38/b and $47.45/b, respectively. They gained $1.97, or 4.5%, and $2.24, or 5.0%, respectively. Tight sour crude supplies in the USGC and high exports supported these grades.

Buoyed again by an uplift in OSP offsets and supported by healthy global sour markets, the value of multipleregion destination grades Arab Light, Basrah Light, Iran Heavy and Kuwait Export improved further.

On average, these grade’s values expanded by $2.64 in August, or 5.7% to $49.07/b. Middle Eastern spot components Murban and Qatar Marine saw their values improve by $2.49, or 5.1%, to $51.51/b and $2.26, or 4.8%, to $49.71/b, respectively. The grades were underpinned by firm demand from Asia in general, but most noticeably from Taiwan and India.

On 11 September, the ORB stood at $51.82/b, over $2.22 above the August average.


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