The Organization of the Petroleum Exporting Countries (OPEC) released its monthly oil market report today, along with analysis showing that the situation should be more favorable to the group’s interests in the coming months.
OPEC also predicts that the global oil market will be tighter next year as China and the developing world increase their demand while competing supply of shale oil “fracking” from the U.S. and other countries will grow more slowly than in 2015.
Performance in June
Moving within a tight range, the OPEC Reference Basket ended on average lower for the month, but higher for the quarter. On average, the basket fell 3.1% in June, but rose a significant 19% in the second quarter, the most in more than three years. Prices were supported earlier in the month by consecutive crude oil inventory draws in the U.S., but subsequently fell on expectations of slowing refinery demand after an unexpected build in product inventories.
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The basket slipped $1.95 to stand at $60.21/b. Crude oil futures were mixed over the month. ICE Brent fell by $1.86 to reach $63.75/b, while Nymex WTI gained 46¢ to end at $59.83/b. ICE Brent has been largely range-bound since the beginning of the second quarter, hovering around $60–65/b.
Prices have been trapped within this range by competing concerns with lower prices supporting demand growth, but affecting U.S. supply growth. U.S. crude stocks have fallen since late April on firm refinery demand, supporting WTI.
Both contracts were down for the year. Speculative bets fell further on higher oil prices in both futures markets. The transatlantic spread narrowed more amid advantageous WTI fundamentals and the Atlantic Basin continued to experience a persistent oversupply. The Brent-WTI spread decreased significantly to around $3.92/b.