Dubai crude soars 8% on week as OPEC+ plans steep cuts

7 Oct 2022

Quantum Commodity Intelligence - Middle East benchmark Dubai crude raced higher the week ending 7 October, as Wednesday's OPEC+ meeting dominated the news cycle.

Front-month Dubai cash for December delivery was assessed by Quantum on Friday at $94.35/b versus $87.27/b for the same contract on 30 September, up 8.1% and the highest weekly contract percentage gain since April.

September was still the front month last Friday, expiring at $89.52/b.

The week started with growing expectations of a steeper OPEC+ reduction than previously envisaged, following weekend briefings from delegates that the group was considering a headline cut of more than 1 million barrels per day.

Wednesday's announced cut of 2 million bpd from November was above even the most hawkish forecasts and while only half of the headline volume will be realized in the form of reductions, the move was still seen as enough to take any slack out of the market heading into the peak winter season.

The cuts will also coincide with likely reduced Russian supplies with sanctions set to tighten and a likely end to sales from the US SPR.

Traders also expect to see a pickup in spot crude buying from Chinese refiners, who have been allocated an additional 15 million mt of refined product export quotas.

However, analysts said the global economic picture still looks bleak, which could accelerate a slowdown in demand once the winter trading cycle is over.  

Meanwhile, Saudi Aramco kept OSPs for November-loading crude largely stable on sales into Asia, at the low end of expectations after backwardation in the underlying Dubai benchmark improved last month.

For Aramco's key customer base in Asia, differentials for the flagship Arab Light grade were left unchanged at Platts Dubai/DME Oman +$5.85/b for loading next month.


The prompt market structure also strengthened with the key M1/M3 spread (Dec22/Feb23), used by National Oil Companies in OSP calculations, widening to a three-week of almost $6/b.

ICE Brent futures for Dec22 were priced at $94.63/b at the Asia close Friday (1630 Singapore), up $6.54/b on the week, or 7.4%, as the Brent/Dubai Dec22 spread narrowed by around $0.50/b to $0.28/b.

Traders said that Dubai strengthened more than its North Sea counterpart, with the Middle East expected to contribute most of the likely 1 million bpd of actual OPEC+ cuts.

The Dec22 Brent/Dubai EFS was down $0.15/b on the week, trading at around $6.10 /b on Friday's Asia close. 

DME Oman futures at 1630 Singapore time were 7.9% higher at $94.24/b for the Dec22 contract, largely tracking cash Dubai.

Light sweet Murban crude futures trading on Abu Dhabi's IFAD Exchange were up 8.2% to close the week at $96.36/b for Dec22, maintaining the premium over Brent futures at around $1.75/b.