Following a period of extraordinary weakness in crude, with Brent and Dubai both falling over $6.50/bbl between May 29 and Jun 03, there has been no shortage of interesting price action. OPEC+’s announcement that the group would continue 2.2mbbls/d of cuts until the end of September, implying they intend to start increasing production from Q4 of 2024, has been bearish for both outright prices and calendar spreads.
The Jul Brent/Dubai contract was at a low two weeks ago, beginning the fortnight at around -25c/bbl. However, an unplanned outage at the Buzzard oil field in the North Sea created some panic in the market. Participants, including refiners, funds and majors/NOCs bought the contract heavily at these levels, which helped to raise the price up to -5c/bbl by the afternoon of May 30. The Jun/Jul Brent/Dubai box even rallied above flat, with the price action indicative of stop outs on the sell-side. Price action subsequently corrected rapidly. The June contract fell to -25c/bbl, after which it has rallied back up to -15c/bbl. Jul Dated/Dubai saw a rebound from May 21-29, rising from -5c/bbl to 35c/bbl, before it collapsed to historic lows of -80c/bbl on Jun 04, after which it rapidly bounced to its current levels of -50c/bbl. This is important for looking at the flow of physical crude towards the East as the arbitrage opens.
The rally in 380 East/West also helped to support Dubai and medium sour crude in general at the end of the fortnight; having markedly declined from May 21-30, it rallied from $12/mt to a high of $20.50/mt on June 04. The Asian refinery margins have been suffering from a weak Singapore gasoline, the Dated/Dubai weakness is pointing physical barrels East and the market is anticipating bearish OSPs (official selling price) this month. This all points to a little lift in Brent/Dubai although the overhang of Forties would need some eating into to provide any heartfelt relief to the North Sea.
