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Asia as the destination of choice for global producers
Asia became a region of key significance which sellers increasingly turned toward for oil demand in the first quarter of 2017.
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A worker riding bicycle passes through an area at Balongan oil refinery facility owned by state-owned energy company PT Pertamina in Indramayu, West Java. (Antara/Rivan Awal Lingga)
W
ith the first quarter of 2017 under our belt, the oil markets are ruminating over several shifts in the underlying strata of the industry’s modus operandi.
For most of January and February, crude benchmarks traded in a tight range, with ICE Brent fluctuating between approximately US$53-$57/b up until March, while NYMEX light sweet crude maintained a close correlation in a $50-$54/b range over the same period.
Prices tumbled in March after the euphoria from OPEC’s unexpectedly high compliance to its cuts turned into willful acceptance as such things are bound to, and a bigger, more resilient issue came into the limelight — that of the almost juggernaut revival of US shale production.
ICE Brent futures hit their lowest point of the year on March 22, settling at $50.64/b, but have climbed back up since then to have settled at $52.96/b on March 30.
NYMEX light sweet crude followed suit, falling to $47.34/b on March 21 — with the ICE Brent/ NYMEX crude spread widening to $3.62/b on that day, but has since closed the gap to settle at $50.35/b as of March 30.
A handful of OPEC/non-OPEC producers — members of the monitoring committee — met in Kuwait on March 26 to conclude that they would keep observing supply and demand fundamentals for another month before deciding whether to extend the current output cut deal beyond its June expiry. The deal will officially be up for review at OPEC’s next ministerial meeting May 25 in Vienna.
Several committee members spoke out in support of an extension of the cuts, but the market barely batted an eyelash — to not continue in the same stead would be the real shocker; it almost seems to be taken for granted now that producers will be in favor of cuts.
