Dubai posts 5% weekly gains, OPEC+ speculation dominates
Quantum Commodity Intelligence – Asian crude oil markets rebounded strongly to register a first gain in five weeks, although the postponement of Sunday's OPEC+ meeting made for volatile trading conditions.
The week was dominated by intrigue from OPEC+, which actually started last Friday after Asian markets had closed, with delegates briefing newswires that the group was considering deeper cuts in Q1 2024.
Quantum assessed front-month Dubai cash for January delivery at $83.05/b in the week ending 24 November versus $79.25/b for the same contract on 17 November, a gain of 4.8%.
Dubai was still around $13/b lower from the 2023 peak of over $96/b set on 20 October.
The OPEC+ drama initially saw Dubai rebound 4.5% on Monday, catching up with the Brent gains from the Friday. Delegates had given strong indications that OPEC+ would at least maintain current policy into the new year while considering a further round of cuts – which would come as additions to reductions already in place.
But by Wednesday, the market was in disarray amid the first signs of cracks in the fragile OPEC+ alliance, with disagreements on production cuts and baseline levels that are used for calculating quotas.
Concerns that that alliance may fracture sent Brent futures tumbling below $79/b, as the OPEC+ meeting was pushed back from Sunday to Thursday.
However, crude markets stabilised at the back end of the week, with expectations that the group will find a compromise deal by next Thursday.
"Brent crude prices recovered from their OPEC meeting delay knee-jerk lower and last printed above $81 before the early futures close," said Stephen Innes, managing partner SPI Asset Management.
"With increased focus on US and non-OPEC oil production, our best guess is that OPEC delayed the meeting to get a peek at the EIA US field production data released on the same day as the newly scheduled meeting. If not, it's a mighty big coincidence," added Innes.
Sources said a deal would need to be struck by the end of next week, given that Saudi Arabia will issue OSPs for January and term allocations in the following week.
Physical
Premiums for physical barrels also rebounded for the first time in over a month, mainly on early-week gains after expectations Middle East producers would trim production in January.
Key medium-sour tradeable grades, including Oman, Al Shaheen and Upper Zakum, were all valued in the Dubai swaps +$1.75-$1.95/b range on Friday, compared to +$1.50/b at the end of last week.
But it was Murban that continued to set the Dubai print as the lowest of the 'Dubai basket' grades, with the lower-sulfur grade facing stiff competition from Atlantic Basin barrels, boosted by the narrow Brent/Dubai EFS that makes arbitrage grades cheaper for refiners.
The prompt Dubai structure also edged up with the M1/M3 (Jan23/Mar24), which National Oil Companies use in OSP calculations, at around +$1.80/b, up $0.30/b on the week for the same spread. However, time spreads are down on the month, with expectations that Saudi Arabia will likely cut OSPs for next month.
ICE Brent futures for Jan23 were valued at $81.39/b at the Asia close Friday (1630 Singapore), up 4.9% versus last week's Asia close, leaving the Brent/Dubai cash spread for January at around -$1.70/b.
DME Oman futures lost ground versus Dubai cash over the week, valued at $82.79/b for Jan24, or up 4.55%.
Light-sweet Murban crude futures trading on Abu Dhabi's IFAD Exchange were trading up 4.5% on the week at $82.75/b for the Jan24 contract.
In the tanker market, VLCC rates eased slightly, with the Middle East Gulf-Far East route seen at just under Worldscale 70, while brokers pegged long-haul US Gulf-Ningbo steady at $10 million on a flat rate.
