Crucial to modern industry, crude oil serves as the lifeblood that propels our transportation, energizes our homes, and serves as the fundamental building block for an array of petrochemical products. Given its pivotal role, the price of crude oil becomes a key barometer of global economic health, subject to continual scrutiny.
In this exploration, we delve into the intricate dynamics of the oil market, employing careful analysis of trends and a nuanced understanding of the delicate dance between supply and demand. Through this lens, we navigate the ever-shifting landscape of oil prices, equipping ourselves to make well-informed decisions within this dynamic market.
This write-up examines November 2023 oil price trends with a specific focus on Bonny Light, WTI, Brent, and the OPEC Reference Basket. By unraveling these trends, we aim to shed light on the potential outlook for December 2023, offering valuable insights for those navigating the complex terrain of the oil market.
Bonny Light Performance
Bonny Light prices started in November at $92.28/bbl and experienced a downward trend throughout most of the month. On November 7, a sharp drop of $3.58/bbl occurred, potentially due to a combination of factors such as weak demand.
Data Source: Central Bank of Nigeria (CBN)
On November 16, a further decline of $7.51/bbl was recorded, reaching a low of $79.85. This is likely due to growing concerns about a global recession and a strengthening US dollar. On November 20, prices started to rebound, rising by $3.25/bbl. This could be attributed to a slight improvement in market sentiment and expectations of OPEC production cuts. The price subsequently rebounded in the last week of November, closing the month at $82.60. The average price for the month was $85.65.
Year-on-Year Analysis of Bonny Light Performance
Notably, the fluctuations were quite pronounced, with variations both upwards and downwards within relatively short periods. The prices of Bonny Light crude oil exhibited notable fluctuations over the past year, indicating a dynamic and somewhat volatile market. Starting in November 2022 at a relatively higher point of $93.36/bbl, there was a significant drop to $79.8/bbl by December 2022. This decrease continued into the following months, hitting a low of $76.91/bbl in May 2023.
However, the market showed signs of recovery as prices began to climb again. From June 2023 onward, there was a gradual but steady increase, reaching $98.16/bbl in September 2023. By October 2023, there was a decline by $3.24 to $94.92/bbl.
Bonny Light prices went further down by a significant $9.27 (10.82%), reaching $85.65/bbl by November 2023.
Data Source: Central Bank of Nigeria (CBN); US Energy Information Administration
Bonny Light Nigeria crude saw a significant 8.26% year-on-year decline between November 2022 and November 2023, decreasing from $93.36/bbl to $85.65/bbl.
WTI and Brent, when compared to Bonny Light, showed comparable trends at various prices. They both decreased significantly over the past year.
Prices for WTI decreased by 7.92% year over year between November 2022 and November 2023, from $84.37/bbl to $77.69/bbl.
Brent also experienced a significant 9.28% year-over-year decline, decreasing notably by $8.48 from $91.42/bbl to $82.94/bbl.
The OPEC Reference Basket (ORB)
The OPEC Reference Basket (ORB) is a weighted average of the spot prices of 13 crudes — Saharan Blend (Algeria), Girassol (Angola), Djeno (Congo), Zafiro (Equatorial Guinea), Rabi Light (Gabon), Iran Heavy (Iran), Basrah Light (Iraq), Kuwait Export (Kuwait), Es Sider (Libya), Bonny Light (Nigeria), Arab Light (Saudi Arabia), Murban (United Arab Emirates), and Merey (Venezuela).
Over the course of the year between November 2022 and November 2023, the prices for ORB in the period exhibit fluctuations. Year-on-year, the ORB price had a change of about 5.36%, a decrease of $4.81/bbl.
The ORB price was at $89.73/bbl in November 2022 and declined to $79.68 by December 2022. A recovery began in January 2023, pushing it up to $81.88 by February.
In April 2023, OPEC agreed to cut production due to global economic slowdown concerns and the potential impact on oil demand. The cut significantly impacted oil prices, which remained higher than before due to OPEC adhering to its production quota and the global economy showing improvement, which boosted oil demand. The effect of this made prices decrease notably to $75.82 by May 2023.
Throughout November 2023, the OPEC Reference Basket (ORB) witnessed fluctuations, starting at $88.54/bbl and hitting a peak of $89.78/bbl on November 3. However, the prices gradually declined, reaching a low of $81.08/bbl on November 17 before experiencing slight fluctuations in the mid-$80 range for the latter part of the month. The month closed at $85.00/bbl, showcasing a varied trend with both highs and lows, potentially influenced by global market dynamics and OPEC’s production and pricing strategies.
Data Source: OPEC
Comparatively, Bonny Light, which had a price per barrel of $85.65, was the most costly of the four crude oil benchmarks examined in this report for November 2023.
The ORB price generally follows the same trends as Brent Crude but with slight variations due to differences in the composition of the two benchmarks. WTI typically trades at a discount to ORB due to its lighter and sweeter crude composition.
Data Source: Central Bank of Nigeria (CBN); US Energy Information Administration; OPEC
December 2023 Outlook
Predicting the future trend of crude oil prices is tricky due to several factors. However, some potential considerations include
- Global economic recovery: A strong economic recovery could lead to increased oil demand and higher prices.
- OPEC’s production policy: OPEC’s future production decisions will greatly affect the world’s oil supply and pricing.
- Geopolitical developments: Geopolitical events and conflicts can interrupt oil supply and lead to price volatility.
- Supply and demand of oil: An increase in demand or a decrease in supply can lead to higher prices, while a decrease in demand or an increase in supply can lead to lower prices.
- Alternative energy sources: The increased acceptance of alternative energy sources could put downward pressure on oil prices in the long term.
