Dubai crude up 5% on week as Saudi extends cuts
Quantum Commodity Intelligence – Middle East and Asian crude ended the week comfortably higher, with supply/demand balances set to remain tight after Saudi Arabia confirmed it will extend cuts until the end of the year.
Quantum assessed front-month Dubai cash for November delivery at $91.09/b in the week ending 8 September versus $86.59/b for the same contract on 31 August for a gain of 5.2%.
Saudi Arabia announced Tuesday it will extend its 1 million bpd production cut for another three months to the end of December, while Russia said it will stick to its 300,000 bpd cut in exports until the end of the year.
This was also followed by Saudi increasing OSPS for most grades to Asia, although differentials came in at the lower end of expectations.
Russell Hardy, CEO of Vitol, told this week's APPEC conference in Singapore that supplies of sour crude will remain tight for the foreseeable future.
"Because of the OPEC+ cuts, there's not sufficient supply (of sour crude) for all these complex refineries. They all want to buy sour crude, but it is not really a Western supply, it is mainly from the Arab Gulf. There are too many customers and not enough material to go around," said Hardy.
Markets also consolidated around 10-month highs after the latest EIA data revealed US commercial crude stocks fell by over 6 million barrels to fresh yearly lows.
Brent/Dubai
ICE Brent futures for Nov23 were valued at $89.95/b at the Asia close Friday (1630 Singapore), up 5.4% versus last Thursday's Asia close. The Brent/Dubai cash spread for November eased to -$1.15/b versus -$1.45/b for the same spread last Friday.
Premiums for physical barrels were seen as relatively solid, with key medium-sour grades, including Oman, Al Shaheen and Upper Zakum, valued at around the Dubai swaps +$2/b, unchanged on the week.
The prompt Dubai structure also held up with the M1/M3 (Nov23/Feb24), which is used by National Oil Companies in OSP calculations, valued at just over +$2/b
DME Oman futures largely shadowed Dubai over the week, closing Friday at $91.04/b for Nov23, with Oman Blend notionally setting the Dubai print this week.
Light-sweet Murban crude futures trading on Abu Dhabi's IFAD Exchange for Nov23 were 5.25% higher on the week at $92.03/b, with sellers again looking for Dubai swaps +$3/b for the distillate-rich grade.
In the tanker market, VLCC costs were lower, reflecting extended Saudi cuts with rates for Middle East Gulf to China quoted below Worldscale 40, while brokers assessed long-haul US Gulf-Ningbo at $7-$7.5 million on a flat rate.
