Dubai crude rallies 3.5% on the week, surges above Brent
Quantum Commodity Intelligence – Benchmark Dubai prices increased by around 3.5% over the week as East-of-Suez markets showed clear signs of strengthening after Saudi Arabia announced Monday it would extend its voluntary crude oil production cuts of 1 million bpd into August.
Quantum assessed front-month Dubai cash for September delivery at $77.85/b in the week ending 7 July, versus $75.20/b for the same contract the previous week for a gain of 3.5%.
At the same time, Dubai values soared versus Brent while the market structure also widened, further demonstrating an improved outlook for Middle East and Asian crude prices.
The Saudi production cut was followed by an increase in Official Selling Prices (OSPs) for August-loading crude, including the flagship Arab Light grade hiked $0.20/b to Platts Dubai/DME Oman +$3.20/b for loading next month.
Despite a firmer sour crude market, some term customers are expected to request lower Saudi volumes for August term loadings, although the broader tightness for heavier grades is likely to limit alternatives.
The Saudi production cut was accompanied by Russia's pledge to reduce exports by 500,000 bpd for August. While most of the reductions are likely to be from the European side, traders noted that Urals crude is now by and large part of the Asian crude supply chain.
On the downside for Asian prices, Iran's oil minister Javad Owji told reporters at this week's OPEC seminar in Vienna Iran's oil output had topped 3 million bpd, while condensate was running at around 750,000 bpd.
According to vessel trackers Kpler, Iran's oil shipments averaged around 1.6 million bpd in May and June, more than double from year-ago levels and the highest since 2018.
On the broader macroeconomic front, concerns over the health of global economy again weighed heavily on sentiment as almost all Federal Reserve officials at their latest meeting indicated further rate hikes were likely this year.
Physical
Physical market activity has been somewhat more subdued after last month's massive volumes in the Platts-operated MOC window, which saw around 73 cargoes nominated and the second highest on record.
But premiums for physical barrels continued to recover from the two-year lows registered in early June, with differentials for medium-sour grades loading in September, including Oman, Al Shaheen and Upper Zakum valued at around Dubai swaps +$1.50-$1.70/b on Friday.
The prompt Dubai structure has also strengthened considerably over the week with the M1/M3 (Sep23/Nov23), which is used by National Oil Companies in OSP calculations, was valued Friday at $1.50/b versus $1.05/b at the start of the week.
ICE Brent futures for Sep23 were valued at $76.69/b at the Asia close Friday (1630 Singapore), up 2.3% versus last Friday's Asia close. The Brent/Dubai cash spread for September widened to around minus $1/b, while the cash spread has turned negative for the next four months.
DME Oman futures were largely tracking cash Dubai over the week, closing Friday at $77.89/b for Aug23, also up around 3.5% from last week.
Meanwhile, light sweet Murban crude futures trading on Abu Dhabi's IFAD Exchange for Aug23 were 2.35% higher on the week at $77.96/b.
In the tanker market, VLCC costs were down from the mid-June surge, with rates for Middle East Gulf to China around Worldscale 60, while on long-haul US Gulf-Ningbo was quoted just above $8 million on a flat rate, having reached in excess of $10 million last month.
