Page 30 - Policy Economic Report - October 2024

POLICY AND ECONOMIC REPORT
OIL & GAS MARKET

Oil Market

Crude oil price – Monthly Review

Benchmark oil prices bounced sharply higher in early October, as potential oil supply risks once again took
centre stage. Escalating tensions between Israel and Iran are fuelling fears of a broader Middle East
conflict and disruptions to Iranian exports. However, a resolution to a political dispute in Libya, which
temporarily halved its oil exports, along with relatively modest production losses from major hurricanes
in the US Gulf Coast and weak end-user demand, have contributed to stabilizing markets.

Hedge funds and other money managers continued to be bearish on oil futures in September. This fuelled
volatility and accelerated the decline in oil futures prices. Similarly in petroleum products, speculators
turned net bearish on gasoil/diesel in both US and European markets. Between the weeks of 27 August
and 10 September, speculators sold an equivalent of 174 mb of oil in ICE Brent and NYMEX WTI futures
and options.

Oil futures prices declined for a second consecutive month in September, dropping approximately 8% m-
o-m, amid heightened market volatility. This downturn was largely fuelled by significant selling pressure
from hedge funds and other money managers. For the first time, the ICE Brent contract turned net bearish,
signalling a further negative sentiment shift among non-commercial participants. Market sentiment
played a key role in driving oil prices over the month.

In September, crude oil spot prices continued their downward trend, extending losses from the previous
month, as selling pressure from non-commercial participants in the oil futures market accelerated. Spot
prices also came under pressure from lower refining margins in all markets, as well as the refinery
maintenance season.

The sweet-sour crude differentials showed mixed movement among regions. In Europe and Asia, the
spread contracted due to a softening of market fundamentals for light sweet crude, primarily driven by
slowing demand during the maintenance season and the high availability of light sweet crude in the
Atlantic Basin, including increased US crude exports. A decline in gasoline crack spreads in all refining hubs
also weighed on the value of light sweet crude. However, the value of medium sour crudes experienced
a smaller decline compared to light sweet crudes. In the US Gulf Coast (USGC), the sweet-sour crude
spread widened slightly.

The OPEC Reference Basket (ORB) value fell in September by $4.82/b, or 6.1%, to stand at $73.59/b. The
ICE Brent front-month contract dropped by $6.01, or 7.6%, m-o-m, to average $72.87/b in September,
while NYMEX WTI dropped by $6.06, or 8.0%, m-o-m, to average $69.37/b. The GME Oman front-month
contract dropped by $4.63, or 6.0%, m-o-m, to average $72.91/b. The ICE Brent-NYMEX WTI first month
spread rose by 5¢ in September, compared to the August average, to average $3.50/b.

Brent crude ranged an average to $75.05 a barrel and WTI ranged to $71.18 per barrel in the month of
October 2024.

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