Dubai crude retreats over 2% on week as demand forecasts fall
Quantum Commodity Intelligence - Middle East benchmark Dubai crude eased back in the week ending 14 October, as a host of bearish indicators knocked sentiment after the sharp gains in the first week of the month.
Front-month Dubai cash for December delivery was assessed by Quantum on Friday at $92.10/b versus $94.35/b the week ending 7 October, down 2.4% on the week and ultimately only making a small dent in the 8% gains registered in the previous week.
The week started on a firm footing as the OPEC-led rally spilled over into Monday, while Moscow's renewed assault against Ukraine heightened calls for tighter sanctions, including plans to finalize proposals to impose a cap on Russian oil exports.
However, sentiment quickly turned negative following a run of poor economic data, along with a rash of demand forecast downgrades by a number of agencies, including OPEC, the IEA and the EIA.
In particular, the Paris-based IEA warned the OPEC+ decision to cut crude oil production by a headline 2 million bpd will likely boost crude oil prices and may tip the global economy into recession.
The rebound in refined products, particularly distillate cracks, helped stabilize prices, with Dubai finishing the week with a green arrow on Friday, but market watchers said the outlook remains very uncertain for the remainder of Q4 and likely to be increasingly weather-driven as winter-demand fundamentals kick in.
Structure
The prompt market structure also softened over the week despite the OPEC+ cuts kicking in from November, with the key M1/M3 spread (Dec22/Feb23), used by National Oil Companies in OSP calculations, eased back by nearly $1/b to below $5/b.
ICE Brent futures for Dec22 were priced at $93.97/b at the Asia close Friday (1630 Singapore), down just $0.66/b on the week, or 0.7%, as the Brent/Dubai Dec22 spread widened to a 10-week high of $1.90/b, compared to $0.50/b last week.
The Dec22 Brent/Dubai EFS widened to $6.80/b, up from $6.10 /b on last Friday's Asia close, making Brent-priced grades more expensive for Asian refiners.
DME Oman futures at 1630 Singapore time were 2.3% lower at $92.06/b for the Dec22 contract, again largely tracking cash Dubai with the Oman grade currently setting the Dubai quote as the weakest of the 'Dubai basket' grades.
Light sweet Murban crude futures trading on Abu Dhabi's IFAD Exchange were down 1.4% to close the week at $5.01/b for Dec22, narrowing the premium over Brent futures to around $1/b versus $1.75/b last Friday.
