Oil prices on the spot market fell once more significantly in August. The “paper market” of contracts has decoupled itself from the physical oil market.
Crude oil spot prices fell in August for the second month in a row. For example, the reference price for North Sea oil fell by $13 a barrel month-on-month, while the price in Dubai fell by almost $7 a barrel. This is from the monthly market report OPEC out. The OPEC reference basket fell $6.65 a barrel, or 6.1 percent, to $101.90 a barrel. But the prices for the NYMEX WTI and ICE Brent grades also fell significantly.
Hedge funds have recently reduced their net long positions in the most important futures contracts. According to the current oil market report, the “paper market” of contracts has decoupled itself from the physical oil market. “In a way, the market is in a schizophrenic state that leads to a kind of yo-yo market and sends the wrong signals, although right now more transparency and clarity and well-functioning markets are needed more than ever so that market participants can make the enormous hedge and manage risks,” according to the oil market report.
Different developments in refining margins
There are different developments in the refinery margins: On the US east coast, the margins fell moderately. High inflation and the expectation of lower economic growth have reduced demand here. In contrast, margins increased in Asia and Europe. There was a shortage of diesel in particular. Due to the high price of natural gas, this is due to the high production costs of diesel.
With regard to global oil demand, OPEC continues to expect an increase of 3.1 million barrels per day for this year. However, the current forecast takes into account that there is increasing demand for oil for electricity production. For 2023, OPEC expects oil demand to increase by 2.7 million barrels per day. Potential easing of Covid restrictions and reduced geopolitical uncertainties should support demand.
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