Dubai crude little changed on week, loses ground to Brent

27 Jan 2023

Quantum Commodity Intelligence - Middle East benchmark Dubai crude posted a third week of gains Friday as China's anticipated post-Covid rebound continued to underpin the January price rally.

Quantum assessed front-month Dubai cash for March delivery at $84.15/b the week ending 27 January versus $83.84/b for the same contract last Friday, an increase of just $0.31/b, but enough to lift prices to the highest level since 18 November.

Market sentiment was again driven by China reopening as mobility levels continued to ramp up ahead of the Lunar New Year, including sharp increases in road transport and flight bookings.

More than 90% of Beijing's 22 million population will have been infected with coronavirus by the end of this month, according to an estimate by researchers from the University of Hong Kong.

Around 76% of Beijing's population had contracted Covid-19 as of 22 December and it was expected to reach 92% by 21 January, according to the study.

The shortened Asian trading week also came off the back of the World Economic Forum, where Fatih Birol, executive director of the International Energy Agency, said oil markets could tighten more than some analysts expect this year.

Birol said that a recovery of the Chinese economy could lead to noticeably higher demand and tighten the market while flagging potential supply disruptions from Russia because of sanctions.

He expects the Russian oil industry to face huge challenges because the international companies that have helped make the Russian oil industry productive, including services firms, have largely left the country.

Geopolitical tensions also ratcheted up after the Biden administration said Wednesday it would equip Ukraine with the Abrams tank, a key reversal in the West's effort to arm Kyiv as it prepares for a fresh Russian offensive.

This came after Germany agreed to send Leopard 2 tanks to Ukraine, provoking a fierce backlash from Moscow.


Firmer outright prices again failed to transfer over to physical oil markets as premiums for March-loading cargoes continued to bump along at one-year lows, with Oman, Upper Zakum and Al Shaheen all valued at around Dubai swaps +$1/b, having to compete against heavily discounted Russian and Iranian barrels.  

The one bright spot was a buying spree from China's Unipec, reported to have lifted at least 17 cargoes of Upper Zakum while also booking around eight VLCCs to ship Brazilian and US crude into China.

The prompt Dubai market structure also remained under pressure as the M1/M3 Dubai spread (Mar23/May23) ducked below $1/b, although the one-year curve was steady at $6.45/b.

ICE Brent futures for Mar23 were trading at $87.85/b at the Asia close Friday (1630 Singapore), up $1.40/b on the week, or 1.6%, while the Mar23 Brent/Dubai cash spread widened by $1.10/b to around $3.70/b.

DME Oman futures at 1630 Singapore were 0.5% higher at $84.35/b for the Mar23 contract, with Oman around $0.40/b over cash Dubai.

Light sweet Murban crude futures trading on Abu Dhabi's IFAD Exchange gained 1.3% to end the Singapore week at $86.52/b for the Mar23 contract.