Middle East crude prices flatline as focus turns to OPEC+
Quantum Commodity Intelligence – Middle East benchmark Dubai crude prices for the week ending 26 May were little changed, after four sessions of steady gains were largely erased Friday.
Quantum assessed front-month Dubai cash for July delivery at $75.35/b in the week ending 26 May, versus $75.00/b for the same contract the previous week, for a gain of 0.5%.
However, prices remain around $3/b below spot values prior to the 1.15 million bpd output reduction announced by OPEC+ members at the beginning of April, which according to some analysts could leave the door open to further cuts.
Indeed, Saudi Arabia's Energy Minister triggered a midweek rally after issuing a "watch out" warning to speculators, reiterating his now-famous "ouching" phrase aimed at short sellers getting hurt.
But the outlook was muddied after Russian Deputy Prime Minister Alexander Novak said he does not expect output changes from current levels when OPEC+ meets in Vienna on 4 June, negating Saudi's "watch out" broadside at short sellers.
However, the Saudi-Russia OPEC+ axis was seemingly back on track by the end of the week as Novak walked back the initial comments.
"OPEC+ group meetings are intended for joint discussion of the state of the market and reaching a consensus on future actions that must be carried out to reach market balance. This is a systemic approach that will also be the basis of the OPEC+ meeting in June, where decisions could be made if necessary," Novak told reporters.
Oil politics were again largely overshadowed by the US standoff over the raising the debt-ceiling, especially after Fitch Ratings said it had placed the United States' triple-A status on "rating watch negative."
Meanwhile, US Federal Reserve economists still expected a "mild recession" at the most recent interest-rate meeting earlier this month, according to minutes of the last meeting, while Fed Governor Christopher Waller said he wouldn't back an end to interest-rate increases without clear signs that inflation is headed toward the central bank's target.
Also weighing on commodities, the Dollar Index smashed through 104 points for the first time since mid-March, making dollar-denominated oil imports more expensive.
Otherwise, supply disruptions from Canada and northern Iraq have largely been priced into the market.
Physical
Premiums for physical barrels continue to stumble at just above two-year lows as differentials for medium-sour grades loading in July, including Oman, Al Shaheen and Upper Zakum were valued at around Dubai swaps +$0.85-$0.95/b on Friday.
This year's sluggish refining margins and stiff competition from heavily discounted Russian and Iranian barrels were again cited for the weak premiums.
The prompt Dubai structure was also sluggish as the M1/M3 (Jul23/Sep23), which is used by National Oil Companies in OSP calculations, was valued Friday at $0.80-$0.85/b, little changed on the week.
This month's weaker structure makes OSP cuts a near certainty, including Saudi Aramco expected to reduce Arab Light premiums for July from the current Dubai/Oman +$2.55/b on June-loading crude.
ICE Brent futures for Jul23 were trading at $76.39/b at the Asia close Friday (1630 Singapore), up 0.25% on the week. The Brent/Dubai spread for July narrowed slightly to around +$1.05/b, down from +$1.20/b.
DME Oman futures were again trading at a small discount to cash Dubai over the week, closing Friday at $75.22/b, or up 0.45% from last Friday.
Meanwhile, light sweet Murban crude futures trading on Abu Dhabi's IFAD Exchange were 0.5% higher on the week at $76.01/b.
In the tanker market, VLCC rates for Middle East Gulf to Asia continued to recover from one-year lows set earlier this month, edging up to around Worldscale 50 this week.
