Dubai crude August average highest in 10 months, Saudi seen hiking OSPs

Quantum Commodity Intelligence – The monthly average price for benchmark Middle East Dubai was sharply higher in August versus July, again underpinned by production cuts from Saudi Arabia and Russia, along with firm demand projections for the rest of the year.

The Quantum average price for Dubai was $86.47/b for October-loading barrels versus $80.45/b on September-loading crude, a gain of 7.5%, as the Middle East benchmark increased by over 7% for the second consecutive month.

The Dubai monthly average is now up over 15% over two months, with June averaging $74.97/b, as the benchmark posted a 10-month high based on averages, which are used for pricing most crude contracts in the region.

On an expiry-versus-expiry basis, Dubai increased from $85.64/b to $87.54/b for a gain of more than 2% and the highest close since October last year.

East-of-Suez markets were again underpinned by Saudi Arabia pledging to keep output at around 9 million bpd for a third month lasting into September, while Russia also extended its curb on exports with a 300,000 bpd reduction next month, versus a 500,000 bpd cut in August.

Further indications of tightening fundamentals came from the August OPEC report, forecasting global oil markets are on course for a steep supply deficit of over 2 million bpd a day in Q3, with Saudi Arabia extending its additional 1 million bpd voluntary cut.

Meanwhile, the IEA said in its latest monthly report oil demand reached an all-time high of 103 million bpd this summer, underpinned by economic growth in OECD countries, while China's demand held up despite a sluggish economy.

Solid refining margins are also underpinning crude, particularly soaring Asian distillate cracks, with benchmark 10ppm averaging $119.15/b in August versus the previous month's $101.68/b.

Asia markets also comfortably outpaced Brent, as Dubai's premium versus Brent futures reached a record negative spread of more than $2/b, while the Brent/Dubai EFS also briefly turned negative for the first time since 2020.

But crude markets were again cautious over China after a run of negative financial indicators, while so far Beijing's limited stimulus initiatives have done little to boost confidence.  

Physical

Premiums for physical barrels also continued to recover from the two-year lows registered over the summer as flagship medium-sour grades loading in October, including Oman, Upper Zakum and Al Shaheen, averaged around Dubai swaps +$2/b over, although eased slightly at the back end of the month.

Meanwhile, the key M1/M3 Dubai cash spread, closely monitored by Saudi Aramco and other Middle Eastern NOCs, averaged $1.97/b versus $1.53/b in July -- an indication that Middle East OSPs should see a third monthly increase.

A wider M1/M3 typically signals a hike in OSPs, although the decision will also depend on Saudi output policy, with an extension of the 1 million bpd cut into October underpinning any OSP hike.  

Asia cash October Brent averaged $85.06/b over the month based on the 1630 Asia close, up 6.75% from last month's average of $79.67/b.

The Brent/Dubai cash spread averaged a record minus $1.41/b in August compared to -$0.79/b in July, having posted an all-time high of -$2.15/b on 24 August.

US WTI averaged $80.85/b based on the October contract at 1630 Singapore, up from $75.26/b the previous month for a gain of 7.4%, largely moving in tandem with Brent and Dubai.

For a full Dubai and crude oil pricing history, visit Quantum's pricing pages.