The ORB rebounded in April with the ease in Dubai's contango, which with ICE Brent above $60/b for the first to its highest value this year, went from $2.40/b to $1.60/b from time this year. The rise was driven partly supported by various bullish January to February. Argus Sour Crude by the notion that the supply glut, that factors throughout the month. Index (ASCI)-related formulas were also caused prices to fall by half since last Besides the rally in oil futures, physical adjusted up by about $1 as the US Gulf summer, may be easing, with higher demand for crude oil was healthy. Refiners' demand for crude came on the back of healthy refining margins, particularly in Asia and, to some extent, in Europe. This was shown in the steep easing of the contango in the Dubai and Brent markets. Refined product values have been supported by lower refinery production due to ongoing seasonal turnarounds. In the US, demand for crude picked up as refiners returned from maintenance. Inventory draws in refined product stocks also supported oil markets. The ORB's value was also boosted by upward adjustments to most Asian and European official selling prices (OSPs) as the contango market structure in these markets narrowed.
On a monthly basis, the OPEC Reference Basket kicked off the second quarter up $4.84 or 9.2 per cent at $57.30/b, on average. Compared with a year ago, the ORB value is about 50 per cent lower at $52.03/b from $104.63/b during the same time in 2014. All ORB component values improved in April along with global crude oil benchmarks. North Sea Dated Brent, Dubai and US light sweet marker WTI were up $3.57, $3.89 and $6.66, respectively, over the month. Positive adjustments to OSPs, offset on the back of shrinking contango, particularly in the Dubai market, have lifted the value of related components. In Asia, April OSP offsets increased by around $1.35 on average. This is in line Coast (USGC) sour market improved.
On the other hand, Brent-related, particularly West African, crude price differentials to the benchmark were progressively under pressure over the month amid a glut of unsold cargoes that built up after a pullback in Asian demand. Asian buyers, such as India, opted for cheaper crudes, curbing demand for Nigerian oil at a time of relatively ample supply. North African crudes were also affected by weak naphtha performance.
Latin heavy sour components gained the most over the month, supported by a significant increase in USGC spot oil markets, particularly medium sour grades. This also supported US-destined components. Brent-related Basket components Saharan Blend, Es Sider, Girassol and Bonny Light increased $3.65 or 6.50 per cent to $59.95/b in April. Middle Eastern spot components and multi-destination grades improved $4.24 and $5.26, to $60.09/b and $56.39/b, respectively. Latin American ORB component Merey was up $3.69 or 8.1 per cent while Oriente jumped $6.93 or 15.1 per cent. On 11 May, the OPEC Reference Basket stood at $62.03/b, $4.73 over the April average.
THE OIL futures market
Crude oil futures ICE Brent and Nymex WTI moved up in April to a 2015 high, demand projected ahead of the peak US driving season. The oil complex also rallied on a slowdown in US refinery activity that boosted refined product futures, while ongoing geopolitical tensions pushed crude futures higher. Oil buyers also fuelled the rally with bets that US crude output will shrink further after two straight weeks of decline.
The weak dollar additionally supported oil and other dollar-denominated commodities. The euro improved slightly against the US dollar, while the European Central Bank (ECB) reported the first y-o-y increase in bank lending to the private sector in almost three years, which was then followed by a weaker-than-expected y-o-y US GDP growth figure for 1Q14 of just 0.2 per cent. Oil futures were also bullish after US government data showed crude stocks falling in Cushing, Oklahoma, for the first time since early December. The rally has been tempered, however, by a stubborn global supply glut.
For the month, ICE Brent first-month futures settled up $4.20 or 7.4 per cent at $61.14/b while Nymex WTI jumped $6.77/b or 14.2 per cent to finish the month at an average of $54.63/b. Compared with 2014, Nymex WTI and Brent were lower by $49.59/b and $51.55/b at $49.93/b and $56.40/b, respectively. On 11 May, ICE Brent stood at $64.91/b and Nymex WTI at $59.25/b. Hedge fund and other money managers raised their bets on rising Brent crude oil prices, which hit a new record in April. Speculators increased net long positions in ICE Brent futures and options by a hefty 57,958 contracts to 276,888 m-o-m, InterContinental Exchange (ICE) data showed, the highest level since records began in 2011. The percentage of long bets to short positions had reached levels, which in the past were followed by a drop in prices. The long-to-short ratio reached 6.4; such an extreme situation has only been seen three times since 2011. All three times brought a strong correction to the market.
Meanwhile, US Commodity Futures Trading Commission (CFTC) data showed another increase in speculation net length in WTI futures, with the outright level back again to that last seen at the end of July 2014. However, the main boost to net length did not come from fresh longs but from a closing of short positions. M-o-m, net length in WTI futures increased sharply by 94,764 contracts to 258,131 lots as a result of a reduction of 80,811 short positions and an increase of only 13,953 long positions. Moreover, total futures and options open interest volume in the two markets decreased 27,506 contracts to 5.27 million contracts.
Crude oil tanker market sentiment weakened in April as average spot freight rates dropped on most reported routes. On average, dirty tanker freight rates were down 8 per cent from the month before. Despite a stronger market seen in the VLCC sector, average dirty spot freight rates declined, influenced by the declines in Suezmax and Aframax freight rates. VLCC spot freight rates showed improvements, rising by around 17 per cent on all reported routes, as a result of an active market and strong tonnage demand. Suezmax and Aframax both closed the month down by 15 per cent and 12 per cent, respectively, as demand for both classes remained weak amid a persisting tonnage oversupply.
Following the drop seen last month, OPEC spot fixtures dropped in April by 4.2 per cent. The decline came mainly on the back of lower fixtures registered for both eastbound and westbound destinations, while global fixtures declined by 2.9 per cent from a month earlier. Compared with a year ago, OPEC and spot global fixtures were down by 11.2 per cent and 9.6 per cent, respectively.
OECD commercial oil stocks rose by 16.0 mb in March to stand at 2,745 mb, more than 161 mb higher than the same time a year ago and 98 mb above the five-year average. Crude indicated a surplus of around 99 mb, while product stocks were in line with the five-year average. In terms of days of forward cover, OECD commercial stocks stood at 61 days, some 2.8 days higher than the latest five-year average. Preliminary data for April shows that total commercial oil stocks rose further by 44.7 mb to stand at 1,250.1 mb. With this build, they were 167 mb higher than the latest five-year average. Within the components, commercial crude and products saw builds of 15.6 mb and 29.1 mb, respectively. The latest information for China showed total commercial oil inventories rose by 7.9 mb in March to stand at 410.9 mb, about 7.0 mb above the same time a year ago. Within the components, commercial crude stocks fell by 5.6 mb, while product inventories rose by 13.5 mb.
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