OPEC Reference Basket in March 2012

Source: OPEC 3/20/2012, Location: Europe

The OPEC Reference Basket continued to move higher in February to settle at $117.48/b, the highest monthly average since April of last year. The upward trend in the Basket price, which began two months ago, was supported by a widening geopolitical risk premium amid fears of supply disruptions inflated by a surge of speculative activities in the crude oil future markets. Bullish US economic data and the positive outcome of the Greek financial bailout were also supportive all throughout the month. The increase comes despite concerns over the impact of high oil prices on oil demand, weak economic data out of Europe, repeated downward revisions in global oil demand growth and the start of a seasonally weaker second quarter. On a monthly basis, the OPEC Reference Basket improved significantly to average $117.48/b in February, capturing a hefty increase of $5.72 or 5.1% above the previous month. Year-to date, the Basket averaged $114.62/b compared to last year’s average of $96.56/b for the same period, an increase of $20.92 or 22%.

All Basket components increased in the month of February. Brent-related grades showed significant gains as they improved by over 8% during the month, the largest month-tomonth percentage gain since the 9% reached in April 2011. On average, Saharan Blend, Es Sider and Bonny Light increased by a hefty $9 to $120.99/b, compared to the $126.07/b of April 2011. Middle Eastern crudes Murban, Arab Light and Qatar Marine moved up to $118.10/b, higher by $5.94/b or more than 5%. On the other hand, Ecuador’s Oriente showed a significant increase of $8.30/b or 8%, translating into a monthly average of $112.44/b. Moreover, Girassol, Basrah Light, Kuwait Export and Iran Heavy improved by $7.50, $6.00, $4.80 and $4.75, respectively. Contrary to the previous month, Venezuelan Merey showed the least increase, affected by developments in the fuel oil market, which went from roaring along a month ago to near collapse. Merey increased by only $1.47/b or 1.4% over the month.

The improvement in North/East African crudes was supported by Dated Brent as it outperformed other regional crude oil benchmarks amid widespread geopolitical concerns surrounding the European markets. Turbulence in North Sea crude oil output and a small increase in arbitrage cargoes to Asia and North America also supported. Dated Brent, despite falling refining margins and an ongoing weak economic environment in the region. At the same time, even with the strong decline in the fuel oil crack over the month amid record inflows from the West that placed the sour market in Asia under strong pressure, Middle Eastern Basket components managed to achieve sizable gains over the month. Toward the end of the month, sour crude market sentiment improved, as seen by the widening backwardation of the Dubai market, as refiners wrap up seasonal turnarounds. In March, the OPEC Reference Basket remained strong, averaging above $120/b, to settle at $124.13/b on 8 March.


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