Oil markets remain well supplied compared to peak tightness in the third quarter, and therefore Brent crude oil could trade in $105/bbl range and not venture out too faron the upside from $110/bbl currently, according to Barclays Research.The bank noted that Q3 was highlighted by supply disruptions and refinery runs that were at elevated levels. But in Q4, the intensity in both the factors have eased, resulting in a cooling effect on prices.

Two key elements to factor in are:
1. How quickly refineries ramp up runs over Q4?
2. How much of Libyan output is expected to return, and how the slate of other supply
shortfalls and increments fares?

Barclays said it expects refinery runs to rise by 1.3-1.6 mb/d globally between October and December. The bulk of the increase will be driven by East of Suez with end-of-season refinery maintenance and increased crude throughput from Jubail, Sichuan and Pengzhou refineries. This will be followed by the US running discounted domestic grades.

"We expect only a marginal increase from OECD Europe (if any) given the lacklustre marginenvironment. This compares with our
forecast of 0.4-0.6 mb/d demand growth for oil products in the same period. The big surge in stocking demand from China in Q4 12 is unlikely to be repeated this year."

US refiners will make hay on domestic crude softness and they will be bogged by infrastructure constraints in the US Gulf Coast than refining margins. Increase on rail links will prove beneficial for them. Europe faces refinery closures, economic run cuts and product exports from other centers. They are expected to rationalise refining capacity and cut runs in Q4.

Libyan output has fallen to 250,000 barrels per day which could rise to 300,000 per day but export capacity is under pressure on political unrest which is not going to end in Q4 anyway, Barclays said.
Source: Barclay's