Summary

In September spot prices were under pressure from softer demand in the spot market with major benchmarks dropping to their lowest monthly average prices since January 2022, amid continuing selloffs in futures and equity markets alongside persistent market volatility.

The ORB fell by $6.58, or 6.5%, to settle at $95.32/b, its lowest monthly value since February 2022. On a yearly average, the ORB rose y-o-y by $37.33, or 55.9%, in 2022 to $104.16/b.

Selloffs extended in futures and equity markets last month, driving oil futures prices to their lowest levels since January 2022 amid growing concerns about slowing global economic growth and energy demand. Furthermore, central banks worldwide continued to raise their benchmark interest rates in an attempt to contain high inflation, and global manufacturing activity weakened. Volatility remained elevated in September, with a further market liquidity decline.

The ICE Brent front-month averaged $7.17, or 7.3%, lower m-o-m in September to stand at $90.57/b, and the NYMEX WTI fell by $7.68, or 8.4%, to average $83.80/b. DME Oman crude oil futures prices fell
m-o-m in September by $7.25, or 7.5%, to settle at $89.99/b.

Hedge funds and other money managers resumed selling in both major futures contracts, ICE Brent and NYMEX WTI, specifically in the last week of September, liquidating an equivalent of about 17 mb compared to late August. The selloff was mainly related to futures and options contracts related to ICE Brent. Speculators cut bullish positions in September on a further deterioration of market sentiment regarding the economic and demand outlooks.

The structure of oil futures prices remained in strong backwardation in September, while the forward curve of Brent futures and Dubai strengthened further compared to the previous month. The nearest months' time spreads moved into larger backwardation despite a sharp decline in oil prices over the last three months.

Sweet/sour crude differentials narrowed in all major regions, specifically in Asia, as the value of light sweet crude declined more than medium and heavy sour crude. A drop in margins of light distillate products, specifically gasoline cracks and low naphtha cracks, along with softening demand for sweet crude in the Atlantic Basin and the return of light sweet supply, put downward pressure on the value of sweet crude. The release of large volumes of light sweet crude from Strategic Petroleum Reserves (SPRs) and the opening of west-to-east arbitrage weighed on the value of light sweet crude in the United States Gulf Coast (USGC) and East of Suez markets.