Dubai crude rallies by 5% for second week to post 2023 highs
Quantum Commodity Intelligence – Middle East and Asian crude prices surged to yearly highs with supply/demand balances in Q4 set to widen to near record levels after Saudi Arabia confirmed it will extend cuts until the end of the year.
Quantum assessed front-month Dubai cash for November delivery at $95.55/b in the week ending 15 September versus $91.09/b for the same contract on 8 September, a gain of around 5% for a second consecutive week.
Front-line Dubai prices have now soared by 33% over the last three-months from a mid-June low of $72/b, with the rally initially triggered by production cuts from Saudi Arabia of 1 million bpd and joined by Russia trimming exports by 300,000 bpd.
Prices were further underpinned this week after the latest OPEC report said the gap between supply and demand will widen to more than 3 million bpd in the fourth quarter.
OPEC also maintained its 2023 demand growth at 2.4 million bpd and the outlook for 2024 growth remained at a "healthy" 2.2 million bpd, according to the latest Monthly Oil Market Report (MOMR).
This was followed by the IEA report as the Paris-based agency calculated global oil inventories had tumbled 76.3 million barrels last month, hitting a 13-month low in August including a 50-million-barrel drop in oil held 'on the water'.
The IEA also expects a "substantial" crude market deficit in the fourth quarter of this year as a result of OPEC+ cuts totalling over 2.5 million bpd since the start of 2023.
Markets largely shrugged off any negative indicators, including a rebound in US inflation figures and data from the EIA showing US crude production hit a fresh post-Covid high of 12.9 million bpd last month.
Premiums for physical barrels also strengthened to yearly highs, including a sharp increase on the Al Shaheen tender, with an early-November cargo awarded by QatarEnergy at Dubai swaps +$2.75/b, although end-month cargoes were only slightly higher on the week at +$2.20/b, reflecting the steep backwardation.
The prompt Dubai structure also strengthened yearly highs with the M1/M3 (Nov23/Jan24), which is used by National Oil Companies in OSP calculations, valued at +$2.30/b, while the one-year Dubai curve soared to an 11-month high $10.72/b on Friday.
ICE Brent futures for Nov23 were valued at $94.21/b at the Asia close Friday (1630 Singapore), up 4.75% versus last Friday’s Asia close. The Brent/Dubai cash spread for November widened to around -$1.35/b versus -$1.15/b for the same spread last Friday.
DME Oman futures again largely shadowed Dubai over the week, up 4.9% $95.51/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 up 5.1% on the week at a 2023 high of $96.75/b, with sellers looking for Dubai swaps +$3.50/b for the distillate-rich grade.
In the tanker market, VLCC costs consolidated at this month’s lower levels, reflecting extended Saudi cuts with rates for Middle East Gulf to China quoted below Worldscale 40.
Meanwhile, global crude and condensate loadings fell to around 47 million bpd in August, the lowest level since June 2022 as exports from Saudi Arabia dropped by almost 1.1 million bpd on the month, according to research from Vortexa.