Dubai crude prices steady on week, structure narrows
Quantum Commodity Intelligence – Middle East benchmark Dubai crude ended the week little changed, with Monday's firm gains largely eroded over the next few sessions as early-week optimism disappeared.
Quantum assessed front-month Dubai cash for July delivery at $73.53/b in the week ending 12 May, versus $73.25/b for the same contract the previous week, for a gain of 0.4%.
That still leaves the Middle East benchmark down by more than 15% from month-ago levels of $87.30/b, prompting speculation that the OPEC+ producer alliance is planning to take further action when it meets in early June.
The UAE's energy minister Suhail al-Mazrouei said earlier this week that the 1.15 million bpd OPEC+ cuts implemented this month were needed to balance oil markets, but so far there have been few clues on the 4 June in-person meeting in Vienna.
"I'm not that worried about the very short term, I think we can manage balancing the supply with demand. I'm more worried about the level of investment required for years to come," said al-Mazrouei.
Oil markets started the Asian week on a positive note amid initial optimism over demand growth from China, while Goldman Sachs reiterated its $100/b crude forecast within 12 months.
But any regional support quickly yielded to broader economic concerns, particularly the outlook for the US economy. Although US inflation data for April came in at 4.9%, slightly below forecasts for a 5% rise, analysts did not rule out the need for further interest rate rises.
In addition, the ongoing row over Washington raising the debt ceiling and further volatility in the US regional banking sector added to market woes.
Disappointing data from China also weighed, as import volume posted its largest contraction in a year during April, casting doubt over the pace of the country's economic recovery after three years of pandemic restrictions.
Inbound shipments of broader goods and commodities to the world's second-largest economy dropped by 7.9%, while figures also showed China's crude oil imports slumped 17% on the month to 10.32 million bpd, a four-month low and around 1% lower than last year.
Physical
Premiums for physical barrels again struggled despite the broader improvement in Asian refining margins, with mainstay medium-sour grades loading in July, including Oman, Upper Zakum and Al Shaheen, valued at around Dubai swaps +$1/b by Friday.
The prompt Dubai structure also came under pressure as the M1/M3 (Jul23/Sep23), which is used by National Oil Companies in OSP calculations, was valued Friday at $0.95/b, down from $1.55/b on the same spread last week.
ICE Brent futures for Jul23 were trading at $74.54/b at the Asia close Friday (1630 Singapore), up 1.6% on the week. The Brent/Dubai spread for July widened out to around +$1/b, up from +$0.10/b, with lighter barrels boosted by the recovery in gasoil and gasoline cracks.
DME Oman futures were trading at a small discount to cash Dubai over the week, closing Friday at $73.38/b, or up 0.2% from last Friday.
Meanwhile, light sweet Murban crude futures trading on Abu Dhabi's IFAD Exchange were 0.8% higher on the week at $73.83/b.
In the tanker market, VLCC rates for Middle East Gulf to Singapore were at a one-year low of around Worldscale 40, having lost further ground following the announced OPEC+ cuts.
Additionally, the approaching summer will see more crude going for direct-burn power generation in the Middle East, reducing export volumes.
