Dubai crude rallies 6% on week, largest weekly gain since October

Quantum Commodity Intelligence - Middle East benchmark Dubai crude posted the steepest weekly gains in over two months amid a more optimistic outlook on global demand for next year.

Quantum assessed front month Dubai cash for February delivery at $76.35/b the week ending 16 December, versus $72.05/b for the same contract last Friday, up 5.95% and registering the steepest gain since the first week of October.

Dubai kicked off the week with a seventh straight loss, continuing the retreat that had wiped around $25/b from headline prices since early November and registered a fresh yearly low of $71.81/b on Monday.

However, sentiment for global crude markets quickly improved on fears of supply disruptions on crude moving through the Bosporus strait and reports that the Keystone oil pipeline was set for an extended shutdown following a spill.

Prices were given a further lift as the US consumer price index (CPI) showed an increase of 0.1% from the prior month and was up 7.1% from a year earlier, beating expectations and sending the Dollar Index crashing to a near 6-month low of around 103 points.

But it was the publication of the IEA monthly report that provided the major lift, after the Paris-based agency said prices could increase next year as Russian exports drop in the face of sanctions and the price cap, while forecasting oil demand growth of 1.7 million bpd in 2023, up 100,000 bpd from its previous report.

"Despite economic headwinds, oil consumption in China, India and the Middle East has been robust," said the IEA, adding that "another price rally cannot be ruled out."

But the rally proved relatively short-lived as prices eased back later in the week as the US Federal Reserve hiked interest rates by 0.5% on Wednesday while flagging further increases, which was enough to lift the Dollar Index off six-month lows.

Friday's sharp retreat in Brent and WTI prices came after Asian markets were closed, so they were not reflected in the Dubai assessment.

Structure

The prompt Dubai market structure also recovered as the M1/M3 Dubai spread (Feb23/Apr23) moved up to $1.70/b compared to last week's low of $1/b, while the one-year curve widened out almost $5/b compared to a 2022 low of $1.70/b last Friday.   

Premiums for flagship medium sour grades, including Oman, Upper Zakum and Al Shaheen also rebounded from yearly lows, pegged Friday at Dubai swaps +$1.70-$2/b for February cargoes.

ICE Brent futures for Feb23 were trading $80.37/b at the Asia close Friday (1630 Singapore), up $4.09/b on the week, or 5.35%, while the Feb23 Brent/Dubai cash spread narrowed $0.25/b to around $4/b.

DME Oman futures at 1630 Singapore time were 6.7% higher at $76.81/b for the Feb23 contract, opening up a small premium over cash Dubai.

Light sweet Murban crude futures trading on Abu Dhabi's IFAD Exchange gained 5.65% to close the Singapore week at $79.29/b for the Feb23 contract.