Dubai crude edges up 1% on week, sets record premiums versus Brent
Quantum Commodity Intelligence – Middle East and Asian crude ended the week slightly higher, shrugging off a number of negative indicators as East of Suez oil benchmarks continued to outpace Europe comfortably.
Quantum assessed front-month Dubai cash for October delivery at $86.20/b in the week ending 25 August, versus $85.40/b for the same contract on 18 August for a gain of nearly 1%.
Crude benchmarks had registered a first weekly loss in nearly two months on China's missed economic targets and the prospects of further rate hikes in the US and Europe, while financial markets were further roiled after China's Evergrande Group filed for Chapter 15 bankruptcy.
Attempts to boost market confidence have so far fallen short, with markets left underwhelmed after China trimmed one of its key rates by just 10 basis points at the start of the week.
Macroeconomic headwinds and property defaults have also spread into the banking industry, sparking liquidity concerns across China's 'shadow banking' banking sector, but so far oil markets have proved resilient with most analyst's forecasting a growing supply/demand deficit for the remainder of the year.
Expectations are also pivoting towards Saudi Arabia further extending its 1 million bpd production cut for at least another month, particularly with Iran and Venezuela pumping more oil.
Brent/Dubai
ICE Brent futures for Oct23 were valued at $84.27/b at the Asia close Friday (1630 Singapore), up 0.35% versus last Friday's Asia close. The Brent/Dubai cash spread for October widened to -$1.93/b versus -$1.38/b for the same spread last Friday, with the inverse price now lasting for an unbroken run of two months.
On Thursday, the Brent/Dubai cash spread widened to record negative levels, as the ongoing OPEC+ cuts and continued demand growth from Asia keep the squeeze on medium sour and heavier crudes. Quantum assessed the cash spread for October-loading cargoes at minus $2.15/b, beating the previous record of -$1.80/b registered earlier this month.
Likewise, the Brent/Dubai EFS slumped to around three-year lows Wednesday of near-parity for the bal-Oct23 contract, while the Nov23 spread was around $0.10/b on Friday.
The EFS is a key metric in comparing Dubai-related crude oil versus grades pricing against the North Sea Brent benchmark, including grades from the Americas, and is used in arbitrage calculations for buyers across Asia.
Already this month Asian refiners are reported to have snapped up at least 40 million barrels of US crude, and huge arbitrage opportunities are expected to continue into 2024 with forward curves indicating a sub-$1/b EFS until February and below +$1.50/b for most of next year.
US Gulf WTI Midland was said to be a current favourite, while Brazilian Tupi is also attracting interest from Chinese refiners.
Physical
Premiums for physical barrels were seen relatively solid, with key medium-sour grades, including Oman, Al Shaheen and Upper Zakum, valued at around the Dubai swaps +$2/b, unchanged on the week.
The prompt Dubai structure also held up with the M1/M3 (Oct23/Dec23), used by National Oil Companies in OSP calculations, valued at +$2/b
DME Oman futures largely shadowed Dubai over the week, closing Friday at $86.39/b for Oct23, up 1.10% from last week, although Al Shaheen and Upper Zakum have been setting the Dubai print this week.
Light-sweet Murban crude futures trading on Abu Dhabi's IFAD Exchange for Oct23 were 0.75% higher on the week at $87.04/b, with sellers again looking for close to Dubai swaps +$3/b for the distillate-rich grade.
In the tanker market, VLCC costs were steady with rates for Middle East Gulf to China quoted at Worldscale mid-40s, while long-haul US Gulf-Ningbo was quoted by brokers at $8-$8.5 million on a flat rate.
