At the end of last month, on the physical side, everything was very weak in Dubai. Dubai had a really weak sentiment, and the squeeze in Brent, combined with the poor Dubai fundamentals, kept the Brent/Dubai suppressed. The now Balmo-July’24 Brent/Dubai reverted down to trade relatively sideways from 21 June to 27 June. Entering July, the market’s attitude has flipped to see feats of strength on both sides of the Suez. On 1-2 July, there was really strong pricing in Dubai. The Bal-Jul/Aug Dubai spread lifted to highs of over 75c/bbl on 2 July. The Aug/Sep Dubai spread rose to 80c/bbl on 2 July from 67c/bbl a week prior. There has been a Chinese major bidding up the window with real strength.
At the latter end of the month, there was strong Q4 selling from various players, including trade houses and banks. The former sold 460kb of Q4 to Onyx in the past fortnight. As everything was pushed down and weakened, the Bal-July’24 Brent/Dubai fell to a low of -25c/bbl. It rallied through the Jul/Aug, Aug/Sep and Sep/Oct boxes, with the Q4 selling suppressing the backend.
We have seen the Aug’24 Brent/Dubai rally to over -10c/bbl, with the curve ticking up and the Bal-Jul/Aug box in a positive handle now, around 20c/bbl. Dubai is really strong, but Brent/Dubai is rallying, which shows the strength of the Brent spreads currently. We have seen real buying interest in Brent/Dubai, including from funds showing some spec interest at these high levels. It seems the upside may be capped, with Dubai this fundamentally strong. The market seems happy to trade the ranges. When Brent/Dubai falls to lows, these are happily swept up, and the market ticks up again. The pricing remaining this strong would contribute to outstripping Brent, but this may depend on the upcoming OSP release. The OSP survey by Reuters has forecasted that the OSP for Arab Light crude may decline by 60c m/m to 80c/bbl, its lowest level since April. If the OSP is lower than expected, we may see players rush in to buy Dubai, and the opposite is true for the opposite scenario. Higher than-expected OSPs may push refiners to WTI and Brent, but with strength in freight, this may not be so OSP-easy.
