Oil & Gas
WTI Narrows the Gap Against Brent
August 2018
Gas supply is increasing, particularly in 2018, and the forecast price correction for 2019 is due to recognition of these robust supplies. By 2021, term markets are predicted to respond to demand pressure from US LNG export terminals starting up, resulting in an anticipated tightening of gas stocks.

Gas in all regions is expected to see to an upwards price trend by the end of the September quarter, as markets head into the Northern winter.

AME's average WTI oil price over July was US$70.61/bbl, up from the June quarter’s average price of US$67.51/bbl. AME's Brent crude price series averaged US$74.95/bbl in the June quarter, 11.5% higher than the March quarter's average. During July, Brent oil prices ranged from US$72.00 to 79.00/bbl, closing the month at US$75.21/bbl and averaging US$75.03/bbl. Demand for oil is being buoyed by sustained demand for gasoline in India, China and the US. In July, Henry Hub natural gas averaged US$2.79/Mbtu, down from the June quarter's average of US$2.85/Mbtu.

On the demand side, the US four-week refinery utilisation rates to July 20th averaged 93.8%; a drop of 2.5% from the same period in June. India, where demand is expected to average 4.7Mbpd of oil, is watching carefully to see if it should completely cut its imports of Iranian crude. The gap left by sanctions against Iran may result in more crude supplies to India from Angola, Nigeria, Russia and notably, from the US. For most of 2018 and 2019, AME has forecast Asian refinery crude demand for heavy oil to be skewed by a shift towards lighter crudes, particularly from Russia and the U.S.

Balancing out the high refining demand was a sustained, high oil supply during July, especially in the U.S. where high shale activity lifted national output to a record of 11Mbpd. There is now upside risk to the forecast average of 10.6Mbpd in 2018. OPEC's output curbs, now under upwards revision, may move markets into a supply surplus for the rest of 2018; OPEC's forecast output for 2018 is 32.7Mbpd. OPEC member Iran, exported a record 2.61Mbpd of crude in April, but the effect of U.S. sanctions on supplies from Iran is likely to deter buyers who will shift towards other suppliers.