Page 33 - Policy Economic Report_Feb'25

POLICY AND ECONOMIC REPORT
OIL & GAS MARKET

Oil Market

Crude oil price – Monthly Review

Global oil markets were whipsawed in January as sharply higher prices at the start of the year gave way
to myriad pressure points. Anxiety over the impact of new sanctions on Russia and Iran, with fears of
potential supply disruptions, triggered an upswing in prices in early January. Market sentiment quickly
shifted to renewed concerns over the world economy amid emerging trade wars and its impact on the
pace of oil demand growth.

Fresh US sanctions on Russia and Iran roiled markets at the start of the year but they have yet to materially
impact global oil supply. Iranian crude oil exports are only marginally lower while Russian flows, so far,
continue largely unaffected. At the same time, non-OPEC+ oil supplies, led by the Americas, are set to
expand by 1.4 mb/d this year, well above projected demand growth. However, improved OPEC+
compliance with agreed targets is slowly chipping away at this year’s projected supply surplus. The
producer alliance confirmed that it plans to start unwinding voluntary cuts from April, noting that “these
additional voluntary production adjustments have ensured the stability of the oil market”.

Hedge funds and other money managers sharply raised their net long positions in ICE Brent to their highest
levels since April 2024. There were also substantial financial flows into ICE Brent, specifically in the first
half of the month. Net long positions in ICE Brent and NYMEX WTI rose by 29.4% over January. Speculators
bought the equivalent of 113 mb during the same period. The announcement of new US sanctions that
could disrupt crude supply prompted speculators to raise bullish wagers, which, in turn, fuelled oil price
momentum. However, in the last week of January, speculators showed mixed movements as WTI-related
net long positions fell amid uncertainty about the impacts of US tariffs on energy imports from Canada
and Mexico.

Crude spot prices rebounded in January, after two consecutive months of decline, with the sour
benchmark Dubai leading the gains, rising 10.2% m-o-m. The increase was driven by uncertainty over
short-term oil supply, alongside easing concerns about demand in China. Supply concerns were further
intensified by US trade policies that could disrupt crude flows from Eastern Europe and North America.
Strong buying activity in the spot market, particularly for near-term loading volumes, as refiners rushed
to secure supply, added further support. A decline in US crude stocks also contributed to the upward
momentum, while short covering in futures markets provided an additional boost.

In January, the ORB value increased by $6.31, or 8.6%, m-o-m, to stand at $79.38/b, as all ORB component
values rose alongside their respective crude oil benchmarks. This largely offset lower official crude selling
prices, particularly toward Asian markets, and mixed movement in the value of crude differentials. The
ORB value was 66¢, or 0.8%, lower in January 2025, compared to the same month last year. West and
North African Basket components – Bonny Light, Djeno, Es Sider, Rabi Light, Sahara Blend and Zafiro, rose
by an average of $5.62, or 7.7% m-o-m, to $78.29/b, and multiple-region destination grades – Arab Light,
Basrah Medium, Iran Heavy and Kuwait Export – increased on average by $6.42, or 8.8%, m-o-m, to settle
at $79.70/b.

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