Dubai crude soars to 7-week high as MOC buying spree continues

Quantum Commodity Intelligence – Benchmark Dubai prices rallied to a seven-week high Tuesday, underpinned by Saudi Arabia's announced 1 million bpd reduction in July and a huge buying spree that could see record monthly volumes traded in the Platts-operated Dubai crude oil window.

Dubai cash for August delivery was assessed by Quantum at $77.45/b for 20 June, the highest since early May, while Dubai soared to a $0.77/b premium over Brent futures, the second-highest level since the 2020 pandemic.

To date, 41 full crude cargoes have been transacted via the Dubai partials window, which could get close to the record of 78 in August 2015 with eight trading sessions to go in June.

PetroChina heads the list of buyers, followed by Totsa with cameos from Shell and Trafigura, while China's Unipec has been the primary seller, with support from trading houses, including Vitol.

Until Tuesday, only Oman cargoes had been nominated via the MOC process, but two Upper Zakum parcels were also declared today, indicating supplies of spot Oman are close to being exhausted.

Around 50 cargoes of Oman crude are likely to be produced in August but with the addition of condensate which is blended into the crude stream, the total could be in the mid-50s. However, some of these cargoes will already be in the hands of this month's buyers, so will not trade in the spot market.

Window

Dubai is traded in clips of 25,000 barrels in the MOC window, with physical convergence on 500,000 barrels, or 20 partials. On reaching 500,000 barrels between the same two counterparties, the seller must declare one of the 'Dubai basket' grades; namely Dubai, Oman, Upper Zakum, Al Shaheen or Murban, while the buyer is obliged to accept the nomination.

Sources estimate there are likely to be over 30 cargoes of Upper Zakum available for spot trading, while the Al Shaheen programme is typically 15-17 cargoes.

Dubai is only around three cargoes per month, while light-sweet Murban is the largest production stream within the 'basket' but less likely to come into play with the grade currently valued around $0.50/b over medium sour barrels.

Meanwhile, ICE Exchange data showed there were over 100,000 lots of balance-June open interest as of 16 June, which means there is still 100,000 million barrels worth of open positions on the cash-settled contract, which in turn settles versus the Platts Dubai print.

The Brent/Dubai EFS has also moved sharply lower in line with the cash spread, as Aug23 values slipped below $1/b and Sept23 EFS was pegged at $1.25-$1.35/b, which is expected to boost the flow of Atlantic Basin crudes to Asia sharply.

At least two VLCCs of North Sea Forties crude have been fixed for Asian discharge, according to broker lists, while US refiners could also pull in West African and US Gulf cargoes despite the surge in long-haul shipping costs. 

The EFS is a key metric in comparing Dubai-related crude oil versus grades pricing against the North Sea Brent benchmark and is used in arbitrage calculations for Asian imports.