Page 26 - Policy Economic Report - December 2024

POLICY AND ECONOMIC REPORT
OIL & GAS MARKET

Oil Market

Crude oil price – Monthly Review

The decision by OPEC+ to delay the unwinding of its additional voluntary production cuts by another three
months and extend the ramp-up period by nine months through September 2026 has materially reduced
the potential supply overhang that was set to emerge next year. Even so, persistent overproduction from
some OPEC+ members, robust supply growth from non-OPEC+ countries and relatively modest global oil
demand growth leaves the market looking comfortably supplied in 2025.

OPEC+ crude oil production may still rise next year if Libya, South Sudan and Sudan can sustain production
and as Kazakhstan’s 260 kb/d Tengiz expansion comes online. Globally, the bulk of supply growth will
continue to be dominated by non-OPEC+ countries, with the US, Brazil, Canada, Guyana and Argentina
adding more than 1.1 mb/d of crude oil and NGL output between them. The start-up of Saudi Aramco’s
Jafurah gas project next year will also boost Saudi Arabia’s NGL supply.

Hedge funds and other money managers adopted a less bearish outlook on crude oil compared to late
October, although their positions showed mixed trends throughout the month, contributing to increased
volatility in oil futures prices.

The forward curve of all major benchmarks continued to flatten in November for the fourth consecutive
month. This was driven by trader’s sentiments amid prospects of de-escalating geopolitical tensions in the
Middle East and ongoing concerns about demand in key consuming countries. Seasonal factors also played
a role, with refinery maintenance in October and November dampening spot market activity and weighing
on front-month prices. However, the oil futures price structure remained in backwardation, signalling
supportive physical crude market fundamentals and a relatively positive short-term global supply-demand
outlook.

The premium of light sweet crude over medium sour crude showed mixed trends across regions but
remained largely little changed m-o-m. In Europe, the sweet-sour differential widened due to weak
demand for sour crude and lower high-sulphur fuel oil margins. In Asia, the spread was little changed.
However, in the USGC, the spread narrowed as sour crude gained support from higher fuel oil margins
while light sweet crude faced pressure due to high availability and lower margins for naphtha and gasoline.

Crude spot prices averaged lower in November, reversing part of the previous month’s gains, mainly
driven by selling in the oil futures market and changes in the market's perception of short-term oil market
outlooks. Spot prices were also under pressure due to a well-supplied spot market amid slow crude
demand for December loading cargoes, particularly in the Atlantic Basin, as refiners tend to reduce their
crude stocks toward the end of the year due to tax considerations.

In November, the ORB value declined by $1.47, or 2.0%, m-o-m, to stand at $72.98/b, as most ORB
component-related crude benchmarks fell. Lower crude differentials and mixed official selling prices
(OSPs) also contributed to lowering the ORB value. Compared with the previous year, y-t-d, the ORB was
lower by $2.79, or 3.4%, from $83.28/b in 2023 for an average of $80.49/b so far this year.

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