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Unexpected Anomalies In Oil Markets

Some trends are just impossible to predict because before they take place, the mere idea of them materializing seems like outlandish. Yet, sometimes the market takes everyone by surprise – the latest such instance which remains to be felt across global crude markets, is the weakness of gasoline margins and remarkable resilience of fuel oil margins. For all of November, gasoline at the Singapore trading hub traded at a discount to fuel oil, even though for much of the year the relation was converse – gasoline was at least 10-15 USD per ton more expensive. There are many factors at play, yet the palpable saturation of the market with light crudes and relative dearth of heavy ones following the second round of U.S. sanctions on Iran takes precedence over the others.

But it is not just the spectacular 1.5 mpbd year-on-year increase in American crude output that has brought this about. As we have established in our previous reports, Libya’s output has stabilized above 1mbpd and the Libyan NOC is working hard to boost production further. Nigeria, too, is reaping the rewards of several relatively calm months, with production reaching 2.16mbpd, a 300kbpd increase compared to May-June 2018 levels. Leading producers of heavy crudes, however, have been suffering – Iran is under U.S. sanctions, whilst Venezuela tries to deal with a damaged pier, blackout-induced fires and property forfeiture at the same time. The narrow light-heavy margins will persist for…




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