The benchmark for Middle East commodities traded in Dubai decreased suddenly over the course of one week, wiping out the advances made from when the OPEC+ members declared reductions of 1.15 million barrels per day.
Quantum assessed front-month Dubai cash for June delivery at $80.75/b in the week ending 21 April, versus $86.05/b for the same contract the previous week, or a fall of 6.1%.The Middle East benchmark has dropped around 7.5% since last week’s five-month high of $87.30/b, now standing just $2/b above levels prior to the OPEC+ cut announcement.
Oil markets started the week on a negative tone as recessionary fears in the West, a stronger dollar and weaker diesel all weighed on sentiment and countered any concerns over supply constraints.
There was a brief respite for oil after figures released Tuesday showed China’s economy grew by 4.5% in Q1, up from 2.9% in Q4 last year. Chinese oil refinery throughputs also surged to a record in March of around 14.9 million bpd, up 9% from a year earlier.
However, the bounce proved short-lived as markets quickly resumed the downward trend, as concerns over further US interest rate hikes were reignited following comments from senior Federal Reserve Bank officials.
Prices did recover from the lows after data from the Energy Information Administration released Wednesday showed a 4.5-million-barrel draw in crude stocks, but again the rally proved fleeting.
Further retreats in distillate and gasoline cracks also weighed on crude throughout the week. PhysicalPremiums for physical barrels also went into reverse, hit by declining refining margins. Flagship medium-sour grades loading in June, including Oman, Upper Zakum and Al Shaheen, were all quoted at Dubai swaps +$1.60-$1.90/b, versus last week’s +$2-$2.40/b.
The prompt Dubai structure also narrowed as the M1/M3 (Jun23/Aug23), which is used by National Oil Companies in OSP calculations, was assessed at $1.58/b, down from $2.10/b on the same spread last week.
ICE Brent futures for Jun23 were trading at $81.08/b at the early Asia close Friday (1230 Singapore), down 4.9% on the week, while the Brent/Dubai spread moved back into positive territory of around +$0.30/b.DME Oman futures largely shadowed cash Dubai over the week, although by Friday had opened up a premium of around $0.15/b.
Meanwhile, light sweet Murban crude futures trading on Abu Dhabi’s IFAD Exchange were down nearly 7% over the week, as lighter barrels were hit by the fall in distillate and gasoline cracks.
In the tanker market, VLCC rates for Middle East Gulf to Singapore were quoted close to Worldscale 70, having lost ground following announced OPEC+ cuts, although healthy demand for shipping barrels from the Americas on long-haul routes helped support the broader market.