Dubai soars to 5-month highs amid global sour crude crunch
Quantum Commodity Intelligence – Dubai crude oil prices climbed to five-month highs this week, while a tightening in supplies of heavy and medium sour crude has seen the Middle East benchmark comfortably outpace Brent this year.
Quantum assessed front-month Dubai cash for June delivery at $89.46/b on 3 April, the highest spot price since late October, while prices have rallied over 23% since printing just above $75/b on 3 January.
Dubai has also outpaced its North Sea counterpart with the closely watched Brent/Dubai cash spread flipping into negative territory, making flagship medium sweet crudes Oman and Upper Zakum more expensive than lighter grades trading in the North Sea.
The Brent/Dubai spread widened to more than minus $0.60/b this week, the steepest negative delta since early December - as supplies of heavier barrels around the globe tighten up - in contrast to ample availability of light sweet crudes trading in the Atlantic Basin.
The 2024 crunch in Brent/Dubai goes back to the fourth quarter when OPEC+ producers announced additional voluntary crude cuts of around 700,000 bpd from the start of this year, which came on top of previous reductions while OPEC+ producers currently have around 5 million bpd of spare capacity.
But the cuts have been heavily skewed towards Middle East Gulf producers, which make up the bulk of core OPEC members and primarily produce heavier barrels – generally ranging from medium sour to super heavy – with the odd exception such as the UAE's flagship Murban grade.
Refining
Middle East availabilities have further tightened with the start up of new refineries, including Kuwait's 615,000 bpd Al Zour plant and Oman's 230,000 bpd Duqm refinery – both running on sour barrels.
Heavier grades have also benefited from increased bunker demand to cover longer shipping routes around the Cape of Good Hope, forcing ships to burn more fuel and underpin fuel oil cracks.
Russia's medium sour Urals crude has become a mainstay for Asian refiners since 2022, but heightened sanctions enforcement and shipping disruptions via the Red Sea have impacted on supplies of the grade, adding to the broader tightness in the East-of-Suez market.
On a global basis, heavy barrels have further tightened, with Mexico reducing crude oil exports to support a ramp-up in production at the new Dos Bocas refinery.
Premiums for US Gulf Mars crude, a primary sour crude oil marker for the US Gulf, were heard at +$1.50-$2/b versus WTI futures in the early part of the week, close to record highs with US refiners left short of heavy barrels needed for it Gulf refineries.
At the same time, the North Sea has seen plentiful supplies of light-sweet crude, not least from the US, as producers continue to pump record volumes of light sweet crude.
Total US exports averaged a record-high 4.1 million bpd last year, according the EIA, up 13% from 2022, while the flagship WTI Midland export grade has been primarily setting the Dated Brent price so far in 2024, in turn weighing on the Brent futures complex in relation to Dubai.
