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OPEC Reference Basket - November 2017

Source: OPEC 12/10/2017, Location: Europe

Amid continuing bullish oil market fundamentals, the ORB monthly value firmed above $55.50/b in October to its highest in almost two-and-a-half years. Throughout the month, prices have been bolstered by rising global demand and expectations that OPEC and other producing countries would extend a deal to adjust output. The ORB increased for the fourth consecutive month, improving by almost 4% to remain above the key $50/b, y-t-d. Oil prices persisted in October as the ongoing bullish market sentiment due to improving market fundamentals, was fuelled further by indications from key OPEC Members, Russia and other exporters that they support extending the 1.8 mb/d production adjustment to rebalance the oil market. OPEC and the participating non-OPEC countries’ production adjustment conformity level remains over 100% for ten months into the 18-month Graph 1 - 1: Crude oil price movement agreement. The potential return of a geopolitical premium in the Middle East is also seen to support prices. Moreover, US crude stocks have continued to fall over the month as imports fell and exports surged, bringing the cumulative US crude stock draw to just under 10 mb in October. The draws are particularly impressive when compared with seasonal norms that show the five-year average US crude stock build for October at 16 mb and last year’s monthly build at 19.7 mb.

M-o-m, the ORB value rose $2.06, or 3.9%, to settle at $55.50/b on a monthly average. Compared to the previous year, the ORB value was 28%, or $11.23 higher, at $50.68/b.

ORB component values improved along with relevant crude oil benchmarks and monthly changes in their respective OSP differentials. A healthy physical market also supported ORB components, particularly Middle Eastern crudes. Crude oil physical benchmarks Dated Brent, WTI and Dubai spot prices increased by $1.21, $1.86 and $2.12, respectively.

The uplift in the Brent crude benchmark supported prices for light sweet crude Basket components from West and North Africa to remain above $55/b. Saharan Blend, Es Sider, Girassol, Bonny Light, Equatorial Guinea’s Zafiro and Gabon’s Rabi values increased on average by $1.30, or 2.3%, to $57.38/b. Nevertheless, physical crude price differentials for these grades were under pressure amid a build-up of excess cargoes due to weak Chinese demand. Trade was limited and some tenders that were expected to clear an overhang in November-loading Nigerian crude failed to do so. Asian refiners have increasingly been moving away from their usual diet, frequently opting for US crude oil as shown by Taiwan's latest tender. Differentials for Nigerian crude were also under pressure on low US refining demand and with Chinese refiners increasingly switching their slate to use more US crude over the last few months.

Latin American ORB components Venezuelan Merey and Ecuador’s Oriente edged up to $50.70/b and $53.77/b, respectively, gaining $1.57, or 3.2%, and $2.47, or 4.8%. Tight sour crudes supplies in the USGC amid considerably lower imports of heavy sour crudes from OPEC Member Countries continued to support these grades.

Buoyed again by the uplift in OSP offsets and support by healthy Asian demand as they prepared to ramp up heating oil production for peak winter demand in the Northern Hemisphere, the value of multiple-region destination grades Arab Light, Basrah Light, Iran Heavy and Kuwait Export improved further. On average, these grades’ values expanded by $2.18, or 4.1%, for the month, to $54.89/b.

Middle Eastern spot components, Murban and Qatar Marine, saw their values improving by $2.45, or 4.5%, to $57.39/b and $2.23, or 4.2%, to $55.14/b, respectively. Spot premiums for Middle East crude for year-end loading have hit multi-month highs, spurred by robust demand in Asia. Asian buyers continued to snap up spot cargoes over the month after Saudi Aramco and Abu Dhabi National Oil Company lowered supplies, and as they both prepared to ramp up heating oil production for peak winter demand.

On 10 November, the ORB was up at $61.91/b, $6.41 above the October average.

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