Dubai crude sees fresh 2023 highs, Saudi cuts underpin price gains
Quantum Commodity Intelligence – Middle East and Asian crude oil markets extended the six-week-long rally, although eased back Friday from the yearly highs registered during the week.
Quantum assessed front-month Dubai cash for October delivery at $87.89/b in the week ending 11 August, versus $87.10/b for the same contract on 4 August for a gain of 0.9%, while front-line prices are up 17% since the start of July.
Dubai peaked at $89.04/b on Thursday, the highest price recorded since last November.
East-of-Suez markets were again underpinned by Saudi Arabia pledging to keep output at around 9 million bpd into September, while Russia also extended its curb on exports with a 300,000 bpd reduction next month, versus a 500,000 bpd cut in August.
Further indications of tightening fundamentals came from the latest report from OPEC, forecasting global oil markets are on course for a steep supply deficit of over 2 million bpd a day in Q3, with Saudi Arabia extending its additional 1 million bpd voluntary cut.
But crude markets had retreated early in the week on further negative indicators from Beijing, including the latest data showing China's oil imports dropped to 10.3 million bpd in July, down almost 19% from June, although still up by around 17% from a year earlier.
Additionally, total exports from China dropped by 14.5% in July from a year ago, falling well short of what analysts had expected and the steepest year-on-year decline since February 2020. Figures also showed China was in deflation for July.
However, prices rebounded after a monthly report from the US Energy Information Administration said it sees Brent prices averaging $86/b in the 2H of 2023, up around $7/b from the previous forecast, while US GDP is forecast to increase 1.9% in 2023, up from a previous forecast of 1.5%.
Meanwhile, tensions in the Black Sea continue to simmer, as Ukrainian President Zelensky said his country would retaliate if Russia continued to block its ports.
Physical
Premiums for physical barrels held firm with differentials on key medium-sour grades at Dubai swaps +$2.20-$2.30/b for Oman, Al Shaheen and Upper Zakum, levels that haven't traded on the spot market since February prior to this month.
As expected, Saudi Arabia increased Official Selling Prices (OSPs) for September, including differentials for the flagship Arab Light grade raised to Platts Dubai/DME Oman +$3.50/b for loading next month, versus +$3.20/b on August cargoes.
Although largely priced in, the OSP hikes were seen as a signal Saudi expects no problems in placing barrels to Asian refiners, despite a second month of increases.
The prompt Dubai structure also pushed up to four-month highs with the M1/M3 (Oct23/Dec23), which is used by National Oil Companies in OSP calculations -- valued at $2.20/b versus $2.05/b last week -- an early indication that buyers are likely facing a third round of hikes on October OSPs.
Further out the one-year curve widened to around $7.90/b, the highest since April.
ICE Brent futures for Oct23 were valued at $86.57/b at the Asia close Friday (1630 Singapore), up 1.2% versus last Friday's Asia close. The Brent/Dubai cash spread for October eased to -$1.32/b versus -$1.55/b for the same spread last Friday, having registered a record -$1.80/b earlier in the week.
DME Oman futures largely shadowed Dubai over the week, closing Friday at $87.92/b for Oct23, up 0.9% from last week, with cash Oman setting the Quantum Dubai print.
Meanwhile, light sweet Murban crude futures trading on Abu Dhabi's IFAD Exchange for Oct23 were 1.05% higher on the week at $88.61/b, with sellers looking for close to Dubai swaps +$3/b for the distillate-rich grade.
In the tanker market, VLCC costs were steady to lower, with rates for Middle East Gulf to China easing slightly to below Worldscale 50, while long-haul US Gulf-Ningbo was steady at $8-$8.5 million on a flat rate.
