OCTOBER 3, 2023
Oman crude benchmark surges to 11-month high
In a strong start to the month of October, the Middle East crude benchmark Oman saw a significant jump, buoyed by anticipations of constrained supplies and heightened demand for regional crude. On the first trading day of the month on Monday, October 2, Oman's premium to Dubai soared to an impressive $3.57 per barrel, marking an 11-month peak. This substantial surge has grabbed the attention of global oil markets and is linked to several key factors shaping the current energy landscape.
One of the primary drivers behind this surge in Oman crude prices is the expectation of tight supplies. The growing appetite for regional crude, particularly in Asian markets, has played a pivotal role in supporting Oman's premium. Asian economies have been rebounding strongly, with countries like China and India witnessing robust economic growth. This has translated into a higher demand for energy, including crude oil, which has benefited Middle Eastern producers like Oman.
Meanwhile, another crude oil benchmark, Murban, escalated to $5.31 a barrel over the Dubai quotes on Monday, reaching a level not seen since late February.
Oman and Murban’s premium to Dubai reaching an 11-month peak underscores the resilience of the region's oil market. Despite the uncertainties and challenges, Middle Eastern crude has remained a key player in the global energy landscape. The reliability of these oil sources and their proximity to major consumers in Asia continue to make them a preferred choice for buyers.
Abu Dhabi's Murban, Platts Dubai and Oman crude oil benchmarks are primary pricing references for crude oil delivered from the Middle East Gulf, Russia, Mexico and other parts of the world to refiners.
On the other hand, the spread between Brent and Dubai surged to $3.10 a barrel, a stark increase from the September average of $1.7 a barrel. This significant expansion in the Brent-Dubai spread indicates that crude cargoes from more distant regions are becoming less economical for Asian buyers. This situation favours Middle East crude, specifically Oman, which is geographically closer to the Asian markets and thus offers lower transportation costs.
A significant factor contributing to the optimism in the Middle East oil market is the expectation that Opec+ is unlikely to make significant changes to its oil output policy during an upcoming panel meeting. Opec+ is a coalition of oil-producing countries that includes the Organization of the Petroleum Exporting Countries (Opec) and non- Opec members like Russia. Together, they have played a crucial role in stabilizing global oil prices through production adjustments.
The anticipation that Opec+ will maintain its current output levels reflects a consensus among member nations that stability in oil prices benefits both producers and consumers. With the global economy still in the process of recovering from the pandemic-induced downturn, many nations are wary of sudden fluctuations in energy prices. Therefore, any decision by Opec+ to keep production steady is seen as a positive signal for market stability.