Middle East weekly crude prices higher, Dubai steadies around $75/b
Quantum Commodity Intelligence – Middle East benchmark Dubai crude prices Friday were higher versus the previous week, as broader economic concerns largely offset the initial positive reaction from the OPEC+ meeting.
Quantum assessed front-month Dubai cash for August delivery at $75.20/b in the week ending 9 June, versus $71.68/b for the same contract the previous week for an increase of 5%.
However, most of that gain was priced in last Friday when Asian markets were closed for the Singapore holiday, while the post-OPEC+ rally proved short-lived.
OPEC announced Sunday that producers had agreed to extend current output deals until the end of 2024, while Saudi Arabia will cut production by a further 1 million bpd in July, reducing output from the OPEC kingpin to around 9 million bpd versus its new quota of 10.478 million bpd.
While the move was initially met with approval, further reviews indicated the market was looking for signs of commitment to existing cuts, particularly from overproducing Russia, while some analysts said Saudi may need to extend the gains beyond July to counter bearish macroeconomic indicators.
Ironically, the week's biggest market-moving event came from a news report that was quickly dismissed. Reports that the US and Iran were close to an interim deal allowing some exports to resume sent crude prices tumbling 5% on Thursday, but most of the losses were recovered after US and Iranian officials issued denials.
Oil markets were also briefly supported by a surprise hike in Official Selling Prices (OSPs) for July-loading crude to Asia, but again proved short-lived. Flagship Arab Light differentials were increased to Platts Dubai/DME Oman +$3/b for loading next month, versus +$2.55/b on June cargoes, whereas trader surveys had called for a cut of at least $0.50/b.
However, a number of Asian refiners are likely to request minimum Saudi volumes and look elsewhere, including at discounted Russian barrels, along with cargoes from Africa and the Americas.
Meanwhile, International Energy Agency Executive Director Fatih Birol said the OPEC+ production cuts might put upward pressure on crude prices, but China's economy is the most important factor for the oil market.
"There are many uncertainties, as usual, when it comes to the oil market, and if I have to pick the most important one it's China," Birol told Bloomberg TV. "Of more than 2 million barrels a day of growth we expect this year in global oil demand, 60% is set to come from China."
"If the Chinese economy weakens, or growth is much lower than many international economic institutions believe, of course this can lead to bearish sentiment," Birol said.
Sluggish data from the US and Europe also weighed on sentiment in the oil sector.
Physical
Physical-market activity in the early part of June has been dominated by the Platts-operated MOC window, which is seeing the most-liquid trading period since 2015.
Some 21 cargoes have so far been nominated – which would be a high total for a full month – with all of the cargoes so far being Oman. However, traders expect Upper Zakum, Al Shaheen and Dubai to feature before the end of the month, along with possibly Murban.
Unipec has been the primary seller, while PetroChina and Totsa have been the main buyers.
However, premiums for physical barrels continue to stumble at just above two-year lows as differentials for medium-sour grades loading in August, including Oman, Al Shaheen and Upper Zakum were valued at around Dubai swaps +$0.80-$1/b on Friday.
The prompt Dubai structure also struggled as the M1/M3 (Aug23/Oct23), which is used by National Oil Companies in OSP calculations, was valued Friday at $0.80, little changed on the week.
ICE Brent futures for Aug23 were trading at $75.86/b at the Asia close Friday (1630 Singapore), up 3.8% versus last Thursday's Asia close. The Brent/Dubai spread for August narrowed to around +$0.65/b, down from +$1.40/b last week, as heavier barrels outpaced lighter grades after the Saudi cut.
DME Oman futures were largely tracking cash Dubai over the week, closing Friday at $75.20/b for Aug23, up 4.9% from last Thursday.
Meanwhile, light sweet Murban crude futures trading on Abu Dhabi's IFAD Exchange for Aug23 were 4.25% higher on the week at $76.01/b.
In the tanker market, VLCC rates for Middle East Gulf to Asia remained subdued, pegged around Worldscale 45 this week and not helped by the Saudi cut.
