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OPEC Reference Basket in September 2012

Source: OPEC 10/18/2012, Location: Europe

The OPEC Reference Basket rose marginally higher in September and settled above the key $110 value for the first time in four months. Moreover, the Basket ended the 3Q12 almost unchanged compared to the 2Q12, in which it declined by 10%. The Basket was basically flat in September with prices initially rising slightly along with the bullish global crude oil market in anticipation of the bond-buying programme of the European Central Bank (ECB) and the US Federal Reserve announcing a third, unlimited round of quantitative easing (QE3).

However, they have fallen since on increasing concerns about the global economy and oil demand growth. Ample supply and a possible release from strategic oil reserves have also helped to keep a lid on prices. The OPEC Reference Basket rose to $110.67/b in September, gaining $1.15/b or 1%. Year-to-date the Basket averaged $110.18/b compared to last year’s average of $107.31/b for the same period, a y-o-y increase of $2.87/b or 2.67%.

The performance of individual Basket components was mixed in September as Asian destined crude improved while African grades (with the exception of Angolan Girassol) retreated. Saharan Blend, Es Sider, Bonny Light and Girassol or Brent-related crudes fell by 17¢ to an average of $112.86/b, down by 0.2% from last month. The multidestination Basket components, namely Arab Light, Basrah Light, Kuwait Export and Iran Heavy, gained 1.1% in September to end at $110.43/b, $1.21 higher compared to the previous month. The Iranian heavy component was largely priced on the Asian formula as little to none was exported to Europe and the US. Latin American Basket components, Ecuador’s Oriente and Venezuelan Merey improved also by $1.28 or 1.3%.

The Middle Eastern crudes Murban and Qatar Marine improved the most over the month increasing by $2.65 or 2.4% to an average of $112.37/b. Dubai/Oman related Basket components in Asia gained the most in September, particularly distillate rich grades as strong middle distillate cracks and winter demand spurred buying. Potential arbitrage to the US West Coast also supported refining margins in the region.

African crudes and imported Middle Eastern sour crudes into Europe were pressured by the weak performance of the spot market for Mediterranean sour and African sweet crude. African sweet crudes continue to be displaced and weakened by US shale crude, while ample supply and poor demand also weakened the Med market. In the US, the positive performance of refined products coupled with wider transatlantic arbitrage spread the improvement in US Gulf Coast light sweet crudes, particularly LLS. This has positively affected the overall prices of the Latin American Basket components, which incorporate these crudes in their pricing formulas. On 9 October, the OPEC Reference Basket improved to $109.46/b.

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