Page 26 - Policy Economic Report - November 2024
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POLICY AND ECONOMIC REPORT
OIL & GAS MARKET
Oil Market
Crude oil price – Monthly Review
Global oil prices have eased from early-October highs, as market attention once again shifted from supply
risks to concerns over the health of the global economy, sluggish oil demand and ample supply. After
surging past $80/bbl at the start of October, Brent crude oil futures fell to around $72/bbl by mid-
November as fears of an attack by Israel on Iran’s energy infrastructure faded. Oil market participants
refocussed attention on fundamentals, including weak Chinese demand, the resumption of Libyan crude
output and the planned unwinding of OPEC+ production cuts, all foreshadowing a well-supplied oil market
in 2025. Speculative length in paper markets remains near historical lows.
Hedge funds and other money managers maintained bearish stances on oil prices with mixed movements
in their positions. In the first week of October, speculators covered a significant volume of short positions
and increased their exposure. Sentiment then shifted and speculators reduced net long positions for three
following weeks. Between the weeks of 8 October and 29 October, money managers sold an equivalent
of 113 mb, leading to a 37.2% drop in combined futures and options net long positions in ICE Brent and
NYMEX WTI.
Crude oil futures rebounded in the first week of October from the lower levels seen in the previous month,
driven by a shift in speculative positioning. Speculative selling subsided and short covering surged as part
of market participants’ rush to close bearish positions. This change was prompted by heightened
geopolitical tensions in the Middle East, which altered the outlook of money managers and increased the
perception of supply risks. Despite the price recovery, volatility remained elevated due to the sudden
shifts and adjustments in speculative positions, as well as traders’ cautious approaches to market
developments.
Crude oil spot prices rebounded in October from the low level seen in September as concerns about the
demand outlook subsided and uncertainty about geopolitical developments in the Middle East persisted.
Easing selling pressure and short covering in futures markets lent support to prices earlier in the month.
Higher refining margins in all major trading hubs provided additional support to oil prices. However, the
oil price rally was capped by signs of a well-supplied spot crude market and a build in US crude oil stocks
in October, which were coupled with maintenance season. Spot crude prices remained at a premium to
futures prices in October, but the spread continued to narrow.
The premium of light sweet crude over medium sour crude continued to show mixed movement among
regions in October, following the same trends observed in the previous month. In Europe and Asia, sweet
sour crude differentials narrowed further as the value of light sweet crude came under pressure due to
the high availability of prompt loading barrels in the Atlantic Basin, and amid the peak of refinery
maintenance season. Meanwhile, stronger fuel oil margins lent support to medium and heavy sour grades.
In contrast, in the US Gulf Coast (USGC), the sweet-sour crude spread widened slightly in October as sour
crude remained under pressure.
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