Dubai crude slumps 7% on week amid demand slowdown fears

5 Aug 2022

Quantum Commodity Intelligence - Middle East crude oil finished the week ending 5 August nearly 7% lower, broadly following the global selloff in oil markets, once again triggered by fears over a global economic slowdown and the subsequent hit to oil demand.

The week started on a softer footing as data revealed China's factory activity unexpectedly retreated in July, despite recent increasing signs of moderate recovery in the world's No 2 economy, according to data released by the National Bureau of Statistics (NBS).

The official manufacturing purchasing managers' index (PMI) slid from 50.2 in June to 49 this month, under the 50-mark, indicating a contraction in activity.

Weak economic data was also released on the state of the European economy, while the midweek release of US oil data triggered a global price retreat after figures revealed a slump in gasoline deliveries, a proxy for demand. 

Front-month Dubai cash for October delivery was assessed by Quantum on Friday at $93.76/b versus $100.81/b on 29 July, down 6.99%, based on the like-for-like Oct22 comparison.

The prompt Dubai structure softened as the M1/M3 Oc22/Dec22, which is used by National Oil Companies in OSP calculations, retreated to around $5.50/b, compared to $6/b for the same Oct22/Dec22 spread last Friday.  

October premiums for flagship medium sour grades, including Oman, Upper Zakum and Al Shaheen, were valued at around +5.50-6/b above the underlying Oct22 Dubai swap, around $3/b down from where September barrels were treading.

However, the weaker premiums largely reflect the lower prompt spread, as the Sep22/Nov22 spread was around +$9/b for much of last month.


Traders said that demand for physical barrels was holding up heading into the Q4 refining season, which was reflected in Saudi's record OSPs for September this week.

OPEC+ announced Wednesday a production increase of just 100,000 bpd in September, a figure below most expectations, although not entirely unexpected.

The core OPEC group pumped 28.98 million bpd of crude last month, a Reuters survey found, up by over 300,000 bpd from June's revised total but still 1.3 million bpd under target.

The biggest increase in production, of 150,000 bpd, came from top exporter Saudi Arabia, while the Kingdom's September quota calls for a further increase of just 30,000 bpd.

ICE Brent futures for Oct22 were pegged at $94.46/b at the Singapore close Friday (1630pm Singapore), down $8.83/b on the week, or 8.54%, narrowing the Brent/Dubai cash spread for October to just $0.70/b, versus $2.46/b on the same spread a week ago.

The October Brent/Dubai EFS was down around $1.50/b on the week, valued close to $7/b Friday. 

DME Oman futures at 1630 Singapore time were 6.7% lower at $94.37/b for the Oct22 contract, opening up a premium of around $0.60/b over cash Dubai.

Light sweet Murban crude futures trading on Abu Dhabi's IFAD were down 8.25% to close the week at $95.20/b for Oct22, maintaining a premium over Brent of around $0.75/b.