Dubai crude lower on week amid de-escalation in Israel/Iran tensions
Quantum Commodity Intelligence – East of Suez crude oil was lower over the week as markets gave back the gains posted during the first half April, reacting to an expected de-escalation in Middle East tensions.
Quantum assessed front-month Dubai cash for June delivery at $87.70/b in the week ending 19 April versus $90.87/b for the same contract on 12 April, a drop of 3%.
Crude prices retreated from last week's six-month highs, although sentiment was dominated by what Israel would do in response after Iran launched hundreds of drones and missiles toward its territory last weekend.
Although Israel said 99% of the projectiles were destroyed, it vowed to respond, but analysts noted that Iran had widely flagged the attack in advance, while one of Iran's top military officers said Tehran has no intention of continuing its aerial campaign against Israel.
Expectations for an immediate retaliation relaxed over the week so when the response did come in the early hours of Friday it caught many traders off guard, with Jun24 Dubai futures initially spiking to around $91/b before retreating sharply.
What Israel did was ultimately viewed as a relatively reserved response and a de-escalation in hostilities, at least for now, reducing the risk premium.
The main threat to oil from a wider Iran/Israel conflict was to the 20 million barrels of crude and oil products that flow through the Strait of Hormuz each day, coming after Iranian forces recently seized a container ship transiting the narrow channel.
A senior Islamic Revolutionary Guard official also said that Iran could "close the Strait of Hormuz" but was so far choosing not to, which was seen as a veiled threat to disrupt trade.
Global crude prices also came under pressure midweek after the Energy Information Administration published data showing US commercial crude stocks at a nine-month high of 460 million barrels, an increase of 2.7 million barrels on the week.
Oil markets were also weighed down after Federal Reserve Chair Jerome Powell cautioned that persistently elevated inflation will likely delay any interest rate cuts until later this year.
Physical
Premiums for Middle East physical barrels were marginally higher over the week as the relative global shortage of heavier barrels continued to support Middle East grades. Differentials on flagship tradeable grades, including Oman, Upper Zakum, and Al Shaheen, were quoted at +$2.20-$2.40/b, consolidating at around six-month highs.
The lighter Murban grade was again setting the Dubai assessment as the lowest of the five Dubai 'basket' grades, with more than a dozen deliveries of Murban so far this month via the Platts Market-on-Close window.
Murban crude futures trading on Abu Dhabi's IFAD Exchange closed the week 3.1% lower at $87.61/b for Jun24, while DME Oman was down a more modest 2.6% at $87.97/b.
ICE Brent futures for Jun24 were valued at $87.25/b at Friday's Asia close (1630 Singapore), down 3.5% on the week and leaving the Jun24 Brent/Dubai cash spread at -$0.45/b, compared to -$0.05/b last Friday.
In the tanker market, VLCC rates were little changed at Worldscale 60-65 for a Middle East Gulf-Far East route, while long-haul US Gulf-Ningbo was softer at $8.5-$8.75 million on a flat rate.
