Dubai crude spreads rebound as inventory releases brushed aside

24 Nov 2021

Quantum Commodity Intelligence - The benchmark Dubai crude forward curve rebounded strongly Wednesday as the paltry stock releases announced by Asia’s largest oil consumers were seen as having a negligible impact on supply/demand balances over the coming months.

Announced stock releases from China, India, Japan and South Korea add up to little more than a day’s collective demand and in the case of China, the 7 million barrels pledged were already believed earmarked for an auction sale before year-end.

India has said it will release 5 million barrels, Japan 4.2 million barrels, while South Korea is expected to pledge around 5 million barrels.

Asia imports around 23 million barrels of crude per day and any stock draw in the coming weeks will likely have to be replenished in the new year, so essentially the announced releases in Asia amount to little more than a time swap, say analysts.

Front-month Dubai cash soared more than 4% on the day Wednesday, with January assessed up $3.38/b at $81.84/b, the highest outright price since 16 November.

Structure

The M1/M3 cash Dubai (Jan22/Mar22) was up $0.24/b to $3.44/b Wednesday, according to Quantum data, while the one-year curve (Jan22/Jan23) strengthened by more than $1/b to just over $9/b, having dropped below $8/b for the first time in six weeks on Tuesday.

The Dubai market structure is closely monitored by oil traders and refiners, plus is also used as a key metric in determining OPEC oil policy and National Oil Companies (NOCs) in setting monthly Official Selling Prices (OSPs).

Meanwhile, the Brent forward curve also rallied strongly as Jan22/Jan23 cash was valued $7.44/b Wednesday at the Singapore market close, up from $6.15/b at the corresponding time Tuesday.

Meanwhile, the Brent/Dubai EFS, a key metric in comparing Dubai-related crude oil versus grades pricing against the North Sea Brent benchmark, also rebounded, largely following the M1/M3 Dubai backwardation.

The January EFS was assessed by Quantum at $4.15/b, up from Tuesday’s two-month low of $3.83/b, while the Brent/Dubai January cash spread was little changed at $0.72/b.