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Oil in Global Economy Series: Oil price in for biggest 3rd quarter gain in 13 years after worst H1 in 20 years
North American benchmark oil index, WTI has moved above $50 per barrel this week, for the first time since early August. Though it is struggling to find buyers above $50 area, we expect the current bullish momentum to continue a bit further and WTI to reach around $56 per barrel over the short to medium term. WTI is currently trading at $50.2 per barrel and Brent at $5.8 per barrel premium to WTI.
Though the raw crude stock is still somewhat above its 5-year average by as much as 190 million barrels, the U.S. distillate stocks have declined below 5-year average according to latest numbers from EIA. WTI is currently up more than 8.5 percent this quarter, which is its best third quarterly performance since 2004. However, the price posted its worst H1 in two decades.
The recent Hurricane Harvey, which battered the U.S. Gulf Coast has exposed a major weakness in the global oil market and that is refinery capacity. As refineries were shut down in the U.S. in the tune of 4.2 million barrels per day, refinery spread all around the world increased sharply and still remains elevated.
The next major focus for oil market in on the November OPEC meeting where oil ministers from OPEC and non-OPEC countries like Russia would discuss the fate of the current production agreement that aims to reduce global oil supply by 1.76 million barrels per day.