Dubai crude eases on week, physical markets hold firm  

22 Sep 2023

Quantum Commodity Intelligence – Middle East and Asian crude prices ended the week slightly lower as broader macroeconomic concerns weighed on markets, but benchmark Dubai held at close to 2023 highs with the supply deficit set to grow in Q4.

Quantum assessed front-month Dubai cash for November delivery at $94.30/b in the week ending 22 September versus $95.55/b for the same contract on 15 September, a drop of 1.3% on the week.

Most of the losses came midweek after the US Federal Reserve held its key interest rate steady. Although widely expected, oils losses came after the Fed signalled another hike is likely this year amid elevated inflation that has been further fuelled by soaring energy costs.

The so-called "dot plot" revealed that 12 of the 19 Fed Committee members believe another 25 bps of rate hikes would be needed by the end of this year.

In addition, it also showed that only 50 bps of policy easing would be appropriate next year, significantly less than the 100 bps of rate cuts that were forecast for 2024 as recently as June, which analysts said could cap US growth prospects next year.

The higher-for-longer rate policy was enough to lift the Dollar Index to around yearly highs of 105.50, making dollar-denominated oil imports more expensive.

But overall crude markets were still buoyed after OPEC predicted last week that the supply deficit will widen to over 3 million bpd in the fourth quarter, while Saudi Arabia and Russia will maintain current cuts until at least the year end.

Prices also found support late in the week after Russia said it would impose temporary restrictions on gasoline and diesel exports, in turn boosting demand for crude oil as diesel cracks surged.


Premiums for physical barrels were holding up at around yearly highs, with key medium-sour grades, including Oman, Al Shaheen and Upper Zakum all valued at around the Dubai swaps +$2.55-$2.65/b, with the November Middle East programs largely placed.

The prompt Dubai structure also strengthened to around yearly highs with the M1/M3 (Nov23/Jan24), which is used by National Oil Companies in OSP calculations, valued at +$2.55/b, while the one-year Dubai curve was close to  $11/b on Frida, having peaked at a yearly high of $11.37/b on Wednesday.

ICE Brent futures for Nov23 were valued at $93.48/b at the Asia close Friday (1630 Singapore), down 0.75% versus last Friday’s Asia close.

The Brent/Dubai cash spread for November narrowed to around -$0.80/b versus -$1.35/b for the same spread last Friday, having at one point reached near parity.

The Brent rebound was a knock-on effect of the surge in WTI after Atlantic Trading and Marketing, the US trading arm of France's TotalEnergies, launched a physical buying spree of US Gulf Coast barrels which potentially closed off the arb to Europe.

WTI Midland is a major component of the North Sea Dated Brent benchmark since it was added in June, so any potential shortfall in US flows to Europe will tighten the North Sea market.

The frontline Brent/Dubai swap (currently Nov23/Nov23) has been trading in negative territory for the last three months, peaking in August at a record -$2.15/b, moving to near parity on Tuesday, before widening back to around -$0.80/b by the end of the week.

This in turn saw the bal. Sep EFS rally from around +$1/b last week to as high as +$2.60/b on Tuesday, before settling back at around +$1.75/b.

DME Oman futures again largely shadowed Dubai over the week, up 1.3% $94.28/b for Nov23, with Oman Blend and Upper Zakum notionally setting the Dubai print this week.

Light-sweet Murban crude futures trading on Abu Dhabi's IFAD Exchange for Nov23 were down 1.35% on the week at $95.43/b, with sellers looking for around Dubai swaps +$3.70/b for the distillate-rich grade.

In the tanker market, VLCC rates recovered from recent lows as Middle East Gulf to China moved back above Worldscale 40, while brokers assessed long-haul US Gulf-Ningbo at around $8 million on a flat rate.