Dubai crude edges up on week, loses further ground to Brent
Quantum Commodity Intelligence - Middle East benchmark Dubai crude edged higher for a second consecutive week, although demand in Asia was seen as patchy and the flat price increase was largely attributed to firmer Brent prices.
Front-month Dubai cash for January delivery was assessed by Quantum at $92.29/b in the week ending 4 November versus $91.06/b the previous Friday, up 1.35% on the week.
However, Asian markets closed before Friday's sharp rally in Brent prices that came later in the session.
The Middle East sour crude benchmark lost further ground to its North Sea light sweet Brent counterpart, as upcoming Russia sanctions and a potential winter fuel crunch again lifted European prices at a faster pace.
The week started with negative news from China dragging prices down amid spiralling Covid-19 cases and weak economic data weighing on Asian markets.
China's official PMIs signalled economic contraction across the sectors in October, as both the official manufacturing purchasing managers index and the non-manufacturing gauge, which measures construction and services activity, fell in the month to 49.2 and 48.7, respectively, missing expectations.
But a second consecutive week of firm US oil data helped lift prices at the back end of the week. Commercial US crude oil stocks fell by over 3 million barrels in the final week of October even as exports slowed, while domestic oil production eased to a five-month low of 11.9 million bpd, which was enough to reboot global prices.
Structure
The prompt Dubai market structure, however, softened over the week, as the key M1/M3 spread (Jan23/Mar23) dipped to $4.15/b on Friday, compared to last week's $4.50/b for the same spread, indicating that demand remains relatively sluggish heading into the new year.
Premiums for flagship medium sour grades, including Oman, Upper Zakum and Al Shaheen, were seen drifting with buying interest at around Dubai swaps plus $4/b, comparable to last-done trades of low $4s/b in October.
Saudi Aramco cut its Official Selling Prices (OSPs) for December-loading crude, following the narrower backwardation in the underlying Dubai structure last month.
For Aramco's key customer base in Asia, differentials for the flagship Arab Light were cut to Platts Dubai/DME Oman +$5.45/b for loading next month versus +$5.85/b for loading in November. However, differentials for Europe were mostly increased, suggesting Middle East sellers will find homes in Europe for any excess barrels.
November also marks the first month of the OPEC+ headline 2 million bpd of reductions, although the actual cuts of around 1 million bpd will fall largely on the Middle East.
ICE Brent futures for Jan23 were priced at $96.45/b at the Asia close Friday (1630 Singapore), up $1.85/b on the week for the same contract month, or just under 2%. The Brent/Dubai Jan23 spread widened to around $4.15/b on Friday, compared to $3.50/b last week, but off from Thursday's four-month high of $5.10/b.
