Overall bearish price action in Brent/Dubai has been unsurprising and the rolldown is generally expected. The global crude complex has weakened significantly over the past week as the geopolitical premium wanes and crude inventories build, which has exerted downwards pressure on both Brent flat price and spreads. However, Dubai crude saw a stronger performance on a relative value basis. The market saw fundamental support from OPEC+ deliberating continued output cuts into Q3, whilst Saudi Aramco raised its June OSP with differentials for Arab Light to Asia at +$2.90/bbl against Dubai. ADNOC also set its June OSP for Upper Zakum at a 60c premium to Murban, the highest ever level. With the Ruwais refinery project, this could tighten sour market fundamentals with ADNOC keen to export more of its flagship Murban crude.
Whilst initially seeing buyside interest going into the end of April, market sentiment flipped following rumours of further OPEC+ cuts as players began to aggressively sell boxes, including Chinese majors. This notably came in Q3/Q4 Brent/Dubai where price action fell by 15c to below -25c/bbl. Front boxes are at very low levels with May/Jun and Jun/Jul at -50c and -30c/bbl respectively, indicating weakness in Brent structure. Jun/Jul Dubai has also been lacklustre, and it is difficult to get excited about crude with lower refinery margins and gasoil remaining in contango, so it is very much a weak demand story.
Last week we saw tradehouse buying in good size of Q4 Brent/Dubai at 67c/bbl, however this support did not last long. We expect continued rangebound action with a bearish bias. Movements in Dubai spreads can be volatile, and depends on open interest and timing, with players exiting positions having an outsized impact on prices. May/Jun is pricing strongly, but Jun/Jul is more reflective of the weaker fundamental picture in crude.
