Page 34 - Policy Economic Report_Mar'25

POLICY AND ECONOMIC REPORT
OIL & GAS MARKET

Oil Market

Crude oil price – Monthly Review

Benchmark crude oil prices fell in February and early March as concerns mounted over the outlook for
the economy and global oil demand growth amid escalating trade tensions and as OPEC+ announced it
would start unwinding production cuts in April. Against this backdrop, discussions started on the
potential for an initial ceasefire and an eventual peace deal in Ukraine. ICE Brent futures declined by
$11/bbl over the past eight weeks, trading near three-year lows around $70/bbl.

The macroeconomic conditions that underpin oil demand projections deteriorated over the past month
as trade tensions escalated between the United States and several other countries. New US tariffs,
combined with escalating retaliatory measures, tilted macro risks to the downside. Recent oil demand
data have underwhelmed, and growth estimates for 4Q24 and 1Q25 have been marginally downgraded
to around 1.2 mb/d, with data for both advanced and developing markets coming in below projections.
Nevertheless, global oil demand growth is still expected to average just over 1 mb/d this year, up from
830 kb/d in 2024, boosted in part by lower oil prices. Asian countries will account for almost 60% of
gains, led by China where petrochemical feedstocks will provide the entirety of growth as demand for
refined fuels reaches a plateau.

Hedge funds and other money managers closed a large volume of bullish futures and options positions
in the ICE Brent and NYMEX WTI futures markets, while sharply increasing short positions related to
NYMEX WTI to their highest in more than a year. This fuelled volatility and accelerated a decline in oil
futures prices. Combined futures and options net long positions in ICE Brent and NYMEX WTI dropped to
their lowest level since last December. Between late January and the week of 25 February, speculators
sold an equivalent of 211 mb of oil in Brent and WTI futures and options positions. Selling was
essentially in NYMEX WTI, as related net long positions fell by 64.8%, while ICE Brent net long positions
declined by 28.3%. Total open interest fell slightly by 1.4% during the same period, driven by a decrease
in NYMEX WTI open interest, which fell by 2.2%.

Crude spot prices averaged lower in February, reversing previous gains in part, pressured down by heavy
selling in the oil futures market and an easing of the supply risk premium. The decline in prices was more
pronounced in the light sweet Brent benchmark, as a speculator selloff was seen in both ICE Brent and
NYMEX WTI contracts. Spot prices of light sweet crude declined more than futures prices amid a well-
supplied crude market, specifically for prompt loading volumes in the Atlantic Basin. This was reflected
in the narrowing of the North Sea Dated–ICE Brent spread. On a monthly average, the North Sea Dated–
ICE Brent spread fell by 75¢ in February, standing at a premium of 16¢/b, compared with a premium of
90¢/b in January.

In February, the ORB value fell by $2.57, or 3.2%, m-o-m, to stand at $76.81/b, as all ORB component
values declined alongside their respective crude oil benchmarks. This largely offset higher official selling
prices, particularly for Asian markets. The ORB value was $2.47, or 3.1%, lower in February, compared
with the same month last year. West and North African Basket components – Bonny Light, Djeno, Es

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