(MENAFN- The Peninsula)
By Satish Kanady
DOHA: After a significant recovery, the Opec Reference Basket (ORB) fell nearly 7 percent in July. This is amid lower-than-predicted demand, high refined product stocks and rising crude supply, which have all significantly exerted pressure over the month.
The Opec Reference Basket (OBR), also referred to as the Opec Basket, is a weighted average of price for petroleum blends produced by Opec members. It is used as an important benchmark for crude oil prices.
The oil cartel noted in its August 2016 report that bearish speculative activities also weighed on oil prices in July. The ORB slipped $3.16 to average $42.68/b in July — the first decline in five months and 32.6 percent decline on y-o-y. Amid rising concerns that a global excess of crude and refined products would pressure markets, delaying a long-anticipated rebalancing of the market, international crude futures fell on both sides of the Atlantic in July.
In line with the main global oil benchmarks, all ORB component values dropped over the month. WTI, Dated Brent and Dubai spot prices plunged by $3.84, $3.28 and $3.61, respectively, weighing on the values of all ORB components, despite improving price differentials in key regions.
The Middle East spot component grades Murban and Qatar Marine, fell on average by $2.74, or 5.6 percent, to $46.54/b, while multi-destination grades, Arab Light, Basrah Light, Iran Heavy and Kuwait Export, decreased by $3.16, or 7 percent, to $41.87/b.
Oil prices have been through a turbulent period since UK voters opted to leave the EU. ICE Brent ended down $3.39 at $46.53/b, dropping around 29 percent on the year. Nymex WTI plunged $4.05 to $44.80/b, slipping by about 24 percent y-t-d. Speculators were once again bearish in all markets. The Brent-WTI, or transatlantic, spread widened to $1.75/b in Brent";s favour during the month, discouraging US imports of West African crudes and other Brent-related grades, while also encouraging some US crude exports.
Hedge funds have also turned more negative, contributing to further pressure on oil prices. The ORB price declined over the month, as pressure from an excess of crude and oil products mounted worldwide. Slower economic growth and high inventories of crude and refined oil products have driven the value of the ORB to almost 7.9 percent below its 2016 high reached in the previous month.
Rising stockpiles of petrol, despite the peak summer driving season in the US, have added to the worries. Nevertheless, the ORB remained up more than 60 percent from the 12-year low seen at the beginning of the year.
The recovery faded after prices above $45/b enticed US oil drillers to return to the well pad. Drillers added 33 rigs in July, the most in a month since April 2014. Cheap crude has led refiners to produce more refined products worldwide, adding to the oversupplied market. The overhang of gasoline in storage amid what should have been a top seasonal demand period put downward pressure on crude and refined product prices. On a monthly basis, the ORB decreased $3.16 to $42.68/b, on average, down 6.9 percent. Compared to the previous year, the ORB value declined $17.78, to $37.20/b.
The Peninsula