Page 26 - Policy Economic Report - September 2024

POLICY AND ECONOMIC REPORT
OIL & GAS MARKET

Oil Market

Crude oil price – Monthly Review

The rapid decline in global oil demand growth in recent months, led by China, has fuelled a sharp sell-off
in oil markets. Brent crude oil futures have plunged from a high of more than $82/bbl in early August to a
near three-year low at just below $70/bbl on 11 September, despite hefty supply losses in Libya and
continued crude oil inventory draws.

Hedge funds and money managers continued their bearish stance on crude oil in August, following
significant reductions in net long positions in July. This contributed to oil price volatility and accelerated
the decline in oil futures prices. Net long positions in ICE Brent were reduced to their lowest levels since
at least 2011. The selling pressure was particularly strong for NYMEX WTI, where a substantial number of
long positions were closed and short positions increased only slightly. Between 30 July and 27 August,
hedge funds and money managers sold an equivalent of 23 mb.

Crude oil futures experienced elevated volatility in August, largely influenced by substantial selloffs from
non-commercial participants in the oil futures markets. The decline in oil prices was further fuelled by
market sentiment, reflecting a potential easing of geopolitical developments and the uncertain economic
outlook in China.

Crude spot prices averaged lower in August, undermined by selling pressure in the oil futures market and
changes in traders’ perceptions regarding short-term oil market outlooks. Spot prices were also pressured
by weaker refining margins in all major hubs. Gasoline, diesel and fuel oil weakened in almost all markets.
However, spot prices of light sweet grades found some support as supply outages in North Africa triggered
rising demand for alternative prompt loading cargoes, including in the Mediterranean and North Sea,
although ample availability of WTI crude in the Atlantic Basin limited the support.

The premium of light sweet crude over medium sour crude widened further in Asia and Europe, while
little changed in the USGC, as light sweet crudes continued to perform better compared to heavy/medium
sour crudes. The surge of demand for light sweet crude, particularly in the Atlantic Basin, following
outages boosted the value of sweet grades. Stronger light distillate margins, particularly with naphtha,
contributed to the widening of the spread between sweet and sour crude.

In August, the OPEC Reference Basket (ORB) value fell by $6.02, or 7.1%, m-o-m, to stand at $78.41/b, as
all ORB component-related crude benchmarks dropped, particularly medium sour benchmarks.

Brent crude ranged an average to $72.90 a barrel and WTI ranged to $69.82 per barrel in the month of
September 2024.

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