Dubai crude edges up over week, shrugs off gasoil slump
Quantum Commodity Intelligence - Middle East benchmark Dubai crude was slightly higher on the week ending 16 September, shrugging off fears over a slump in Chinese demand and the collapse in gasoil cracks during the second half of the week.
Front-month Dubai cash for November delivery was assessed by Quantum on Friday at $91.02/b versus $90.40/b on 9 September, up 0.68% on the week.
The Middle East benchmark strengthened in the first half of the week, reaching a high of $94.45/b, mostly shrugging off the negative reports from China with regard to expanding lockdowns.
Prices found support on reports that OPEC+ producers may consider further production cuts to counter the drop in Chinese oil demand, with Saudi Arabia potentially considering a short-term unilateral cut.
JP Morgan, which is believed to be close to Saudi thinking, had suggested the OPEC+ group may need to cut production by 1 million bpd to "stem the downward momentum in prices and realign physical and paper markets which appear disconnected."
But the midweek IEA report eventually tipped the scales in favour of the bears, as the energy watchdog maintained its downbeat prospects on China for the rest of the year, forecasting the biggest drop in China's oil demand for three decades.
The agency said global oil demand growth would slow to a halt by the end of the year on a faltering global economy, especially in China, but it still ends the year higher and recovers quickly in 2023.
Asian crude largely shrugged off the collapse in diesel margins, which came on reports China was set to unleash a flood of gasoil into the export market in time for Q4, as premiums for crude improved at the back end of the week.
Premiums for flagship medium sour grades, including Oman, Upper Zakum and Al Shaheen, topped $6/b over Dubai swaps on Friday for the first time since early August, indicating demand remains robust.
Structure
The prompt market structure also firmed with the key M1/M3 spread (Nov22/Jan23), used by National Oil Companies in OSP calculations, was around $0.50/b higher on the week at $6.20/b, while the one-year curve was up $1/b to $14.40/b.
ICE Brent futures for Nov22 were priced at $90.57/b at the Asia close Friday (1630 Singapore), up just $0.24/b on the week, or 0.26%, as the Brent/Dubai Nov22 spread moved back into negative territory on Friday, closing the week at $0.45/b.
The Nov22 Brent/Dubai EFS was slightly higher on the week, trading at around $5.75/b on Friday's Asia close.
DME Oman futures at 1630 Singapore time were 0.73% higher at $91.00/b for the Nov22 contract, again largely converging with cash Dubai.
Light sweet Murban crude futures trading on Abu Dhabi's IFAD were up 0.70% to close the week at $92.53/b for Nov22, increasing the premium over Brent futures to nearly $2/b.
