Chinese firms lead June Dubai trading, derivatives volumes soar
Quantum Commodity Intelligence – Several of the world's trading giants have squared off this month in the Platts-operated Dubai crude oil trading window, with each side fronted by one of China's state-owned trading behemoths, while the spike in physical activity has also boosted volumes of Dubai-linked derivatives.
To date, some 26 full cargoes of crude have been transacted via the Dubai partials window and although so far a long way short of the record of 78 in August 2015, the final monthly tally is likely to be one of the highest recorded.
China's Unipec has been the primary seller, with support from trading houses including Vitol, while PetroChina heads the list of buyers, followed by Totsa with cameos from Shell and Trafigura.
Dubai is traded in clips of 25,000 barrels in the MOC window, with physical convergence on 500,000 barrels, or 20 partials. On reaching 500,000 barrels between the same two counterparties, the seller must declare one of the 'Dubai basket' grades; namely Dubai, Oman, Upper Zakum, Al Shaheen or Murban, while the buyer is obliged to accept the nomination.
So far, all of the nominations have been for Oman, reflecting its current status as the lowest-priced among the five 'basket' grades, but sources said Upper Zakum and Al Shaheen were likely to come into play if the current rate of transactions continues.
The June 2023 play is so far closely mirroring the record August 2015 volumes, when Chinaoil's massive buying spree was met with selling largely from Unipec, with support roles from Shell and Vitol.
Derivatives
Large physical trading positions are usually backed by even larger derivatives positions, with exchange data showing a healthy increase in Dubai futures volumes since April and year-on-year.
Dubai first-line futures (DBI) traded over 800,000 lots in May, up nearly 15% from April and compared to around 450,000 lots in the same month last year.
One lot is equal to 1,000 barrels, with transactions either taking place directly on the Intercontinental Exchange screen or posted as block trades for clearing.
Exchange data showed as of 12 June there were still over 100,000 lots of balance-June open interest, which means there are 100,000 million barrels worth of open positions on the cash-settled contract, which in turn is settled versus Platts Dubai print. July was at 106,000 lots of OI, while August was close to 70,000 lots.
While the volumes might sound mediocre by the standards of Brent or WTI, it's a marked improvement for a contract that until recently 25,000 lots/day would be viewed as a decent total.
Volumes have remained buoyant into June, peaking at nearly 75,000 lots on 6 June, while the less-liquid Brent/Dubai contract (BOD) also racked up 31,000 lots on the same day.
