• Average oil prices fell for the second consecutive month in November. In addition to the bearish sentiment in the crude oil futures market, oil prices have generally returned to be more aligned with the reality of fundamentals where ample supplies, combined with seasonally weak global demand, have served to weigh on prices.
• The Iranian nuclear deal struck on the last week of November has not changed fundamentals much, as the precursory agreement does not include the lifting of the embargo on oil trade against the country, with much of the sanction relief ($6 to $7 billion) taking the form of oil revenue that has been frozen in foreign banks.
• The Brent-WTI differential has widened to the highest level in more than eight months to around US$19, as WTI was weighed down by record levels of production in the US while Brent continued to derive support from heightened geopolitical uncertainty in the Middle East.
• We expect Brent and WTI to converge in the coming months as WTI has probably been oversold and there is evidence of a return of bullish sentiment in the futures market. Meanwhile, there exist downside risks on Brent from the current low levels of Libyan and Iranian production which embodies a high degree of upward potential.

For further analysis download the full report.

• Oil Market Update – November 2013 (PDF 244 KB)