Dubai crude extends gains, nears 2023 highs
Quantum Commodity Intelligence – Middle East and Asian crude oil markets continued the firm upwards summer trend during first week of August as further cuts pledged by Saudi Arabia and Russia reversed midweek losses following the downgrade of the US' credit rating.
Quantum assessed front-month Dubai cash for October delivery at $87.10/b in the week ending 4 August, versus $83.92/b for the same contract the previous week for a gain of 3.8%, while front-line prices are 16% since the start of the July and up 21% since early June.
Friday's assessment was just $0.20/b off the mid-April 2023 high, and close to levels not seen since November of last year.
Saudi Arabia confirmed Thursday it would extend its 1 million bpd production cut for at least another month, while Russia said it would reduce exports by 300,000 bpd in September.
Those announcements were enough to reclaim all of Wednesday and early Thursday's losses, which came after ratings agency Fitch issued a surprise downgrade of US government debt, cutting the country's rating to AA+ from AAA on Tuesday.
Additionally solid refining margins underpinned crude with soaring Asian distillate cracks offsetting weakness in the light-ends part of the barrel.
On the negative side, sluggish data from China continues to weigh on sentiment with the latest PMI data providing little encouragement that the economy will speed up.
Some traders believe China's oil demand is close to peaking for the year, while Goldman Sachs this week revised downwards China's demand growth for 2023 by 125,000 bpd.
Physical
Premiums for physical barrels consolidated at higher levels with differentials for key medium-sour grades all offered Dubai swaps +$2/b or higher for Oman, Al Shaheen and Upper Zakum, levels that haven't traded on the spot market since April.
The prompt Dubai structure also pushed up to four-month highs Friday with the M1/M3 (Oct23/Dec23), which is used by National Oil Companies in OSP calculations, valued at $2.05 versus $1.70/b last week.
Dubai continued to trade at a huge premium to the North Sea Brent marker, repeating the record levels registered in late July on the Sep23 spread.
ICE Brent futures for Oct23 were pegged at $85.55/b at the Asia close Friday (1630 Singapore), up 2.4% versus last Friday's Asia close. The Brent/Dubai cash spread for October widened to -$1.55/b versus -$0.37/b for the same spread last Friday.
DME Oman futures largely shadowed cash Dubai over the week, closing Friday at $87.13/b for Oct23, up 3.3% from last week.
Meanwhile, light sweet Murban crude futures trading on Abu Dhabi's IFAD Exchange for Oct23 were 3.35% higher on the week at $87.13/b, with sellers looking for close to Dubai swaps +$3/b for distillate-rich grade.
In the tanker market, VLCC costs were steady to lower, with rates for Middle East Gulf to China stagnating at around Worldscale 50, while long-haul US Gulf-Ningbo was again quoted by brokers at around $8 million on a flat rate.
