Summary

The main crude spot benchmarks fell to their lowest monthly average since last May. In August, North Sea Dated and Dubai's first month dropped m-o-m by $4.19 and $3.46, respectively, or 5.6% and 4.8%, to settle at $70.80/b and $69.37/b. The WTI first month fell the most among benchmarks, declining by $4.85
m-o-m, or 6.7%, to settle at $67.73/b.

The ORB value fell by $3.20 on average in August to settle at $70.33/b, a m-o-m decline of 4.4%, and its largest drop since September 2020. ORB component values dropped on a sharp decline of their related crude benchmarks, offsetting a higher monthly change in their respective official selling price differentials for all components to the Asian market, and most components to the European market.

Crude oil futures prices on both sides of the Atlantic moved sharply lower during the first three weeks of August. They fell to their lowest levels since last May amid deteriorating market sentiment, as concerns about short-term oil demand outlooks in Asia, mixed economic data, and the prospects of higher global oil supply triggered a sharp sell-off. However, oil prices recouped some of their previous losses in the last week of August, after concerns about weakening oil demand eased. Large declines in US crude oil stocks and supply disruptions in Mexico and the Gulf of Mexico also contributed to support oil prices. The ICE Brent front-month in August fell m-o-m by $3.78, or 5.1%, to average $70.51/b, and NYMEX WTI dropped by $4.72 m-o-m, or 6.5%, to average $67.71/b. DME Oman crude oil futures prices declined by $3.42 m-o-m, or 4.7%, to settle at $69.31/b.

As oil prices dropped, hedge funds and other money managers extended the previous month’s sell-off and massively reduced their net long positions in the first three weeks of August, hitting their lowest level since November 2020.

Although the market structure of all three major oil benchmarks – ICE Brent, NYMEX WTI, and DME Oman – remained in backwardation, uncertainty about the short-term oil demand outlook, lower seasonal crude demand in Asia, and the prospect of rising global oil supply flattened the backwardation forward curves.

The sweet/sour crude differentials widened in Europe and the US Gulf Coast (USGC) on more robust margins of light sweet crudes compared to heavier crudes, and a plentiful supply of sour crude. Strong margins for naphtha and gasoline supported the value of light sweet grades. However, in Asia, the sweet/sour crude differentials narrowed as the sweet crude value fell more than that for sour crude.