Dubai crude average highest in 13 months, Saudi set to hike OSPs
Quantum Commodity Intelligence – The monthly average price for benchmark Middle East Dubai was sharply higher in September versus August, once again underpinned by production cuts from Saudi Arabia and Russia and concerns over the growing gulf between supply and demand.
The Quantum average price for Dubai was $93.31/b for November-loading barrels versus $86.47/b on October-loading crude, a gain of 7.9%, as the Middle East benchmark increased by over 7% for a third consecutive month. It was also the highest monthly average since August 2022.
On an expiry-versus-expiry basis, Dubai increased from $87.54/b to $96.16/b for a gain of almost 10% and the highest settlement since August last year.
East-of-Suez markets were again underpinned by Saudi Arabia pledging to keep output at around 9 million bpd until the end of the year, while Russia also extended its curb on exports with a 300,000 bpd reduction until at least December.
With demand growth seen holding firm heading into the final quarter of 2023, prices were also buoyed after OPEC predicted the supply deficit will widen to over 3 million bpd in the fourth quarter.
Global crude markets also received a boost in the latter part of the month as EIA data revealed US commercial stocks had dropped to yearly lows, while inventories at the Cushing hub have slumped below 22 million barrels - close to what analysts view as the minimum operating level for the NYMEX delivery point.
Strong fundamentals were enough to see off ongoing concerns over the state of the global economy after markets had dipped when the US Federal Reserve flagged a further interest rate hike for this year.
In addition, the Fed outlook showed that only 50 bps of policy easing would be appropriate next year, significantly less than the 100 bps of rate cuts that were forecast for 2024 as recently as June.
Meanwhile, a $9/b spike in Q3 versus Q2 Dubai marked the first quarterly gain in five, although the Q3 2023 average of $86.63/b was still down $10/b from Q3 2022.
Physical
Premiums for physical barrels in Asia also ramped up to yearly highs, with key medium-sour grades, including Oman, Al Shaheen and Upper Zakum, reaching Dubai swaps +$2.50-$2.75/b by mid-month before moving above $3/b in the final few days of September.
The firmer premiums were seen holding, with sellers looking for around +$3.50/b on December spot barrels.
The prompt Dubai structure also strengthened to around yearly highs in the latter part of the month with the M1/M3 (Nov23/Jan24), which National Oil Companies use in OSP calculations, valued above +$3/b, while the one-year Dubai curve briefly hit $13/b.
The surge in premiums and market structure makes a hike in Saudi Aramco OSPs a near certainty, with other Middle East set to follow with a fourth monthly increase.
Asia cash November Brent averaged $92.43/b over the month based on the 1630 Asia close, up 8.7% from last month's average of $85.06/b.
The Brent/Dubai cash spread averaged minus $0.88/b in September, easing from the record -$1.41/b in August as Western benchmarks outpaced Dubai on concerns over depleting US inventories, which also includes government SPR stocks still floundering just above record lows.
US WTI averaged $88.66/b based on the M2 contract at 1630 Singapore, up from $80.85/b the previous month for a gain of 9.6%, but WTI proved the star performer with the November contract gaining 11% over the month.
