Oil Products: Alternatives Contain Price Hikes
Oil product prices continued to rebound in Q313 as a result of upward movement in crude oil prices. However, they have not returned to Q113 levels yet despite all three crude grades - Brent, Dubai and WTI - gravitating towards Q113 averages at the time of writing. This supports our view that a tapering in oil product prices is expected for the following reasons: lower crude oil prices, relatively muted demand and a comfortable supply picture in the downstream sector. Moving forward, growing challenges to oil-based fuels with the growth of gas and natural gas liquids production particularly in the US would also suppress rises in prices of oil-based products. Increasingly stringent emission controls in the shipping sector would see bunker fuel prices in Rotterdam particularly hit.
Our refined products forecasts methodology is based on estimating the future spreads between each product - gasoline, gasoil/diesel, naphtha, jet fuel/kerosene, bunker fuel 180 and 380 - and its regional benchmark: WTI for products sold at New York, Brent for Rotterdam and Dubai for Singapore. Therefore, changes in crude prices (and our crude price forecasts) will automatically trigger movements in our forecasts for oil product prices.
|Brent, WTI Moves Back Up|
|Front Month Price Of Brent & WTI, January - Present (US$/bbl)|