Crude Oil and Refining: Quarter three performance

Average Brent crude oil prices remain similar to first half of 2024 settling, between US$83 and US$85 per bbl.  However, this relatively flat quarterly trend has masked short-term volatility, as regional instability and economic headwinds continued to disturb prices.  Price volatility was particularly evident in quarter three. 

Brent crude oil prices recovered robustly from a six-month low approaching US$75 per bbl in early June to almost US$89 per bbl opening July.  The June trough was spurred by impending end of OPEC+ voluntary supply cuts, and weakened expectations on global economic activity.  Falling refinery margins raised expectations of reduced capacity utilisation and lower crude demand.   

Price recovery was driven by OPEC+ grouping’s early June decision to extend voluntary cuts to October, and wider cuts to end of 2025.  Geopolitical tensions in the Middle East continued to ramp up, notably including the assassination of senior Hezbollah personnel and Houthi attacks on Red Sea shipping. 

Price gains reversed by early August, with Brent prices bottoming out at US$78 per bbl.  Disappointing seasonal gasoline demand in the United States remained below pre-pandemic years.  Weaker than anticipated global economic indicators exerted negative pressure.  An interest rate rise in Japan, continued faltering in the Chinese economy, and slowdowns in U.S. employment growth offset ongoing upside risk stemming from unrest in the Middle East. 

Prices rebounded to US$83/bl by mid-August and remained above US$80/bl into September, as summer demand peak alongside OPEC+ restricted supply saw global inventories decreasing somewhat.  An ongoing dispute between rival factions in Libya for control of the central bank saw production and export facilities shuttered, removing half of Libyan crude output from the market. 

Brent prices plummeted below US$72/bl in the first two weeks of September to settle at lowest since December 2021.  The US$8 per bbl decline was driven by impending relaxation of voluntary OPEC+  supply cuts estimated at 180 000 barrels per day in October.  Hopes for political stability in Libya relaxed tightness in the market, deepening the price slump.  September saw the end of the U.S. driving season, and weak manufacturing data from China dented market confidence in future demand.  OPEC+ announcement that voluntary cuts would be extended through to end-November was not sufficient to halt the slide.   

Brent trended upwards to approach US$75 per bbl by mid-September, aided by announcement of the first cut to U.S. interest rates in over four years.  Although Libyan crude exports returned to some extent, absence of a full agreement continued to cap exports.  

Cost of petrochemical feedstocks sourced from the refinery broadly followed the pattern of crude oil prices, with naphtha prices dipping to a low in June after April’s peak, before recovering strongly through July and then trending downwards once again in August. 

Find out more...

Quarterly Business Analysis: Petrochemicals, Polymers and C1 Chemicals - Q3 2024

The Quarterly Business Analysis provides key insight into production economics for a broad range of commodity petrochemicals, polymers and C1 chemicals.  The analysis presents a review of costs, prices and margins for typical production assets, providing a valuable view of regional and value chain competitiveness and is is available for each key price setting region - Asia Pacific, Middle East, Western Europe and the United States.  A quarterly report provides insightful commentary to illustrate current trends, related to recent market developments.  The accompanying database is updated monthly.

About Us - NexantECA, the Energy and Chemicals Advisory company is the leading advisor to the energy, refining, and chemical industries. Our clientele ranges from major oil and chemical companies, governments, investors, and financial institutions to regulators, development agencies, and law firms. Using a combination of business and technical expertise, with deep and broad understanding of markets, technologies and economics, NexantECA provides solutions that our clients have relied upon for over 50 years.