Mideast oil benchmarks wallow in discounts, lowest since 2020

SINGAPORE, Dec 19 (Reuters) – Middle East crude
benchmarks Dubai and Oman hit their lowest levels since 2022 as
low pre-holiday liquidity, soft demand from top buyers China and
Japan, and a prompt Omani oil sale weighed on the market,
according to Reuters data and traders.

The fall in benchmark prices may prompt world’s top exporter
Saudi Arabia to cut February term prices for a second straight
month, traders said, despite extending its voluntary supply cut
as part of OPEC+’s strategy to support prices.

Cash Dubai and DME Oman futures weakened to discounts of 46
cents and 65 cents a barrel against Dubai swaps at Monday’s
close, levels not seen since 2020, Reuters data showed.

Meanwhile, Murban crude futures, which briefly slipped into
negative territory last week, recovered to a premium of 27 cents
to Dubai swaps.

The benchmarks are used to price about 18 million barrels
per day of oil exported from the Middle East and Russia,
accounting for nearly 18% of global supply.

“Generally, liquidity has been poor,” an analyst with a
trading firm in Singapore said.

He added that a tender issued by Oman’s energy ministry last
week to sell crude loading this month spooked traders who cut
their long and short positions in Dubai spreads and Brent-Dubai
spreads, respectively, causing prices to tumble.

Middle East cargoes typically trade two months ahead to
account for the time it takes to ship oil to Asia.

QatarEnergy has also sold four crude cargoes loading in
February at discounts, the lowest levels since 2020.

In addition to slowdown in demand from China and Japan,
traders said refineries across Asia are headed for seasonal
maintenance from March that will reduce demand.

Some Japanese refineries had suffered outages which reduced
appetite for spot cargoes, the sources added, speaking on the
condition of anonymity.

“This month demand is super slow,” a Singapore-based trader
said.

A buyer at a North Asian refiner said some buyers brought
forward their spot purchases to earlier this month because of
the year-end holidays.

Unipec, the trading arm of Asia’s largest refiner Sinopec,
had been purchasing more arbitrage supplies from Brazil and West
Africa in recent months, reducing its demand for Middle East
oil, traders said.

Big Chinese refiner Rongsheng Petrochemical has also been
absent in the spot market, as it will be increasing purchases of
Saudi term supplies from January, they added.

Another industry source said there was simply too much
supply in the market from Iran, the U.S., Venezuela, Brazil and
Guyana.

However, the first analyst expects the market to ride out
the last two weeks of 2023 and rebound in January.

“When January comes, I expect bulls to re-emerge,” the
analyst said.
(Reporting by Florence Tan; Editing by Varun H K)



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