Dubai crude up 4% on week, backwardation up on tight supply

4 Feb 2022

Quantum Commodity Intelligence - Benchmark Middle East Dubai crude strengthened 4% in the week ending 4 February, registering fresh seven-year highs in the process as oil markets maintained the firm upwards trend in place since mid-December.

Front-month Dubai cash for April delivery was assessed Friday at a new multi-year high of $90.25/b, versus $86.75/b on Jan. 28, up $3.50/b, or a gain of 4.03%.

Front-month Dubai prices have now rallied more than $20/b since the Dec. 20 low of $70.10/b, or 29%, as geopolitical tensions and supply shortfalls again underpinned East of Suez markets.

Fears that any escalation on the Ukraine border could disrupt Russia supplies, along with OPEC+ falling behind on output pledges, also lifted market structure to a multi-year high.

The one-year Dubai cash forward curve measuring the Apr22/Mar23 spread, which is the equivalent of the Feb22/Jan23 Dubai swaps curve, was assessed by Quantum at $11.67/b Thursday, compared to under $6/b in late December and a seven-month low of around $4.50/b on Dec. 10.

The front-line Apr22/May22 spread soared above $2/b for the first time since November, while the closely-watched M1/M3 (Apr22/Jun22) spread also widened to a near three-month high of around $3.60/b.

Brent

ICE Brent futures for Apr22 were trading $91.80/b at the Singapore close, up $3.15/b on the week, while the 12-month Brent structure at the Asian close was pegged at around $10.80/b.

The Brent/Dubai cash spread for April was pegged at $1.55/b, compared to $1.85/b last Friday, while the April EFS was up more than $0.50/b on the week at $5.16/b.

DME Oman closed the week up $3.32/b at $90.65/b for the Apr22 contract, largely tracking Dubai.

Light sweet Murban crude trading on Abu Dhabi's IFAD exchange posted the largest gains among Middle East benchmarks for the second consecutive week, underpinned by firm distillate cracks.

The front-line Apr22 contract ended the week up $3.77/b at $92.59/b, or 3.77%, establishing a premium of around $0.80/b over Brent.