Dubai crude slumps 7.5% on week, focus switches to oil fundamentals
Quantum Commodity Intelligence – Asian crude oil markets were sharply lower over the week as focus switched to concerns over a slowdown in demand growth heading into the new year, while there was less emphasis on the Middle East conflict.
Quantum assessed front-month Dubai cash for January delivery at $81.61/b in the week ending 10 November versus $88.25/b for the same contract on 3 November, a fall of 7.5%.
Dubai had racked up losses of almost $7/b during the first four days of the week to register the lowest print since 20 July before steadying in Friday's early close for Asia (1230pm Singapore) ahead of the three-day weekend.
The week kicked off with Saudi Arabia and Russia reiterating that current cuts will remain until the end of the year, but traders took little notice with the policy already flagged several times. Markets did take some comfort as it raised the possibility that the 23-member OPEC+ group would prepare for an extension to cuts when it meets on 26 November in Vienna.
However, this was quickly superseded by concerns over a demand slowdown, with interest rates likely to remain high, while global oil inventories are predicted to show a build in the first half of 2024.
Oil prices also came under pressure after data from China's customs agency revealed China's exports tumbled for a sixth consecutive month, down 6.4% compared to the previous year, driven by deteriorating trade with major partners in Europe and North America.
The Eurozone also continued to deliver disappointing economic results as Q3 GDP shrank 0.1% quarter-over-quarter, prompting fears the bloc could be heading into recession.
Meanwhile, the Middle East conflict remains largely contained to Gaza, although analysts said the prospect of supply disruptions cannot be entirely ruled out given the regional importance for oil markets.
Markets were also under pressure after the latest data from the American Petroleum Institute revealed a sharp rise of nearly 12 million barrels in crude stocks, although this was in part offset as gasoline inventories eased 400,000 barrels and distillate stocks dropped 2 million barrels.
Physical
Premiums for physical barrels again struggled after another sluggish performance from the refined products sector, with diesel margins in Asia coming under pressure and in turn increasing the likelihood of run cuts.
Key medium-sour tradeable grades, including Oman, Al Shaheen and Upper Zakum, were all valued in the Dubai swaps +$1.45-$1.60/b range on Friday, compared to around +$2/b last week and the lowest since July.
Meanwhile, Saudi Arabia kept its OSP for flagship Arab Light unchanged at Platts Dubai/DME Oman +$4/b, which traders said now looks on the high side compared to similar medium-sour grades available in the spot market.
The prompt Dubai structure also eased with the M1/M3 (Jan23/Mar24), which National Oil Companies use in OSP calculations, valued at +$1.50/b, which was down $0.50/b on the week for the same spread.
ICE Brent futures for Jan23 were valued at $80.50/b at the Asia close Friday (1230 Singapore), down 7.70% versus last Friday's Asia close.
The Brent/Dubai cash spread for January widened marginally to around -$1.10/b, while the Brent/Dubai EFS crunched further, raising the prospect of increased flows of arbitrage barrels from the Atlantic Basin.
DME Oman futures again largely shadowed Dubai over the week, valued at $88.60/b for Jan24, with Oman Blend nominally setting the Dubai assessment this week as the lowest of the 'basket' grades.
Light-sweet Murban crude futures trading on Abu Dhabi's IFAD Exchange were trading down 7.6% on the week at the early Singapore close at $81.55/b for the Jan24 contract.
In the tanker market, VLCC rates slipped back on the growing likelihood of OPEC extending cuts into 2024. Middle East Gulf-Far East was back below Worldscale 70, while brokers pegged long-haul US Gulf-Ningbo at under $10 million on a flat rate.
