Summary

The OPEC Reference Basket (ORB) value closed 2019 higher m-o-m, climbing more than $3/b in December to settle at $66.48/b, its highest monthly value since April 2019. Oil prices gained for the second consecutive month, amid improved oil market fundamentals including continued market stabilization efforts conducted under the DoC, as well as easing trade tensions between the US and China.

Crude oil futures prices ended the year higher, with ICE Brent rising by $2.46, or 3.9%, to $65.17/b, while NYMEX WTI increased by $2.73, or 4.8%, to $59.80/b m-o-m in December. Moreover, international benchmark Brent crude futures closed the year almost 23% higher than the level registered in late 2018, while NYMEX WTI was up by 34%. However, in terms of the yearly average, oil prices declined in 2019. ICE Brent was $7.53, or 10.5% lower in 2019, at $64.16/b, while NYMEX WTI fell by $7.86, or 12.1%, to $57.04/b, compared to 2018. At the same time, DME Oman crude oil futures prices rose m-o-m in December by $2.72, or 4.3%, to settle at $63.05/b. Y-t-d, DME Oman was lower by $5.89, or 8.4%, at $63.99/b, compared to the same period a year earlier.

Hedge funds and other money managers sharply increased their speculative bets on rising oil prices during December in both ICE Brent and NYMEX WTI. Over the month, money managers raised their bullish positions by a hefty 44% to 694,253 contracts in late December, on expectations of a more balanced global oil market.

The market structure of all three crude benchmarks ICE Brent, NYMEX WTI and DME Oman remained in backwardation in December, reflecting the improving oil market fundamentals. Tightening supply in the market, due to voluntary and involuntary measures, as well as healthy seasonal oil demand contributed to a further widening of the backwardation in December.

Despite the tight sour crude market, the differential between light sweet and heavy sour crudes widened in Asia and Europe as refiners raised their demand for sweeter grades to comply with the new International Maritime Organization (IMO) low sulphur regulation. The spread between High Sulphur Fuel Oil (HSFO) and Very Low Sulphur Fuel Oil (VLSFO) continued to widen in December to record highs. Yet, the sweet/sour differential narrowed on the US Gulf Coast (USGC).