As of June 1, the spread between Brent and WTI – the two major world oil benchmarks – has widened to US$11/b. This is essentially the widest level in 3 years, and although it pales in comparison to the peak spreads of US$26/b in 2012, it also points to some fundamentals issues within crude supply and demand at the moment.
At least until three months ago, the Brent-WTI spread was within the US$4-5/b region. Now it has doubled. What happened? Brent prices have risen some 14% over the past three months, while WTI is up just 7.5%. The last time this happened – in the 2011-2013 period – it was because the US was still maintaining its ban on crude oil exports, which meant that soaring shale oil production was trapped within continental US, and with US refineries geared towards producing heavier, sourer crude grade, the domestic refining industry was not able to convert them into exportable products. Too much oil sloshing around in the US that was trapped, while crudes based on Brent pricing were free to move around the world. The lifting of the crude export ban in 2015 seemed to solve that issue, but now something else has risen its head.
A different bottleneck seems to have emerged – a shortage of pipeline capacity to bring shale supplies to the benchmark delivery point in Cushing, Oklahoma, and then a further shortage of pipeline and port capacity to send US crude to a hungry world market. That’s been depressing WTI prices, but it is also accurate to say that Brent crude is facing issues that are inflating its price levels – causing the growing gap.
With Iran and Venezuela facing new sanctions designed to punish their crude exports, Brent – as the global benchmark – has been spooked into higher levels due to this. Which explains why Russia and Saudi Arabia have made very recent public statements that they are willing to reverse their course of maintaining the OPEC-NOPEC supply freeze levels, in order to keep a lid on soaring prices. Rosneft is already testing for increased crude output capacity and Saudi Arabia seems happy to corral the rest of its OPEC allies into ‘turning the tap of spare capacity on.’ This should help plug any potential gap caused by the departure of Iranian and Venezuelan volumes – which could reach up to 500-600,000 bd. It is almost amusing to see how Saudi Arabia, which only a few weeks ago was championing higher prices while the rest of OPEC was content to have prices stabilise at US$70/b, reversing its position. WTI prices may be depressed now because of infrastructure constraints, but once those are solved – though it may take years – Saudi Arabia does not want to run the risk of encouraging more US shale production that necessary, leading to another oil price crash in the near future. A dramatically widening Brent-WTI is an issue that presages problems in the future; tackling it is a prudent way of mitigating potential threats to the future stability of oil prices.
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Already, lubricant players have established their footholds here in Bangladesh, with international brands.
However, the situation is being tough as too many brands entered in this market. So, it is clear, the lubricants brands are struggling to sustain their market shares.
For this reason, we recommend an impression of “Lubricants shelf” to evaluate your brand visibility, which can a key indicator of the market shares of the existing brands.
Every retailer shop has different display shelves and the sellers place different product cans for the end-users. By nature, the sellers have the sole control of those shelves for the preferred product cans.The idea of “Lubricants shelf” may give the marketer an impression, how to penetrate in this competitive market.
The well-known lubricants brands automatically seized the product shelves because of the user demand. But for the struggling brands, this idea can be a key identifier of the business strategy to take over other brands.
The key objective of this impression of “Lubricants shelf” is to create an overview of your brand positioning in this competitive market.
A discussion on Lubricants Shelves; from the evaluation perspective, a discussion ground has been created to solely represent this trade, as well as its other stakeholders.Why “Lubricants shelf” is key to monitor engine oil market?
The lubricants shelves of the overall market have already placed more than 100 brands altogether and the number of brands is increasing day by day.
And the situation is being worsened while so many by name products are taking the different shelves of different clusters. This market has become more overstated in terms of brand names and local products.
You may argue with us; lubricants shelves have no more space to place your new brands. You might get surprised by hearing such a statement. For your information, it’s not a surprising one.
Regularly, lubricants retailers have to welcome the representatives of newly entered brands.
And, business Insiders has depicted this lubricants market as a silent trade with a lot of floating traders.
On an assumption, the annual domestic demand for lubricants oils is around 100 million litres, whereas base oil demand around 140 million litres.
However, the lack of market monitoring and the least reporting makes the lubricants trade unnoticeable to the public.
Headline crude prices for the week beginning 11 February 2019 – Brent: US$61/b; WTI: US$52/b
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