Brent v Dubai

In our previous report, we anticipated a prolonged period of de‑risking in the Brent/Dubai complex, with prices oscillating within a broad band, and that’s exactly what we’ve seen. Over the past fortnight, the Jun’25 Brent/Dubai crack traded between -$0.25/bbl and +$0.80/bbl, settling at $0.55/bbl as of 20 May. There has been a recent void of trade house positioning in Brent/Dubai, with price action driven by smaller screens and hedging flow. Dubai and Murban spreads were also supported this week, which is consistent with the seasonal rally we typically see in spreads as refinery maintenance winds down and summer fuel demand picks up.

This week saw a significant reversal in Brent/Dubai, with the M1 contract sliding from 5 May’s high of $0.75/bbl to $0.12/bbl (at the time of writing on 6 May). This decline marked a shift from the rally building up ahead of the OPEC+ meeting on 3 May. Nevertheless, this support did not have substantial participation backing it up, with flows on screen primarily driving the price strength. However, price action suggests we may have seen short covering by players. Meanwhile, the OTC market was quieter, with majors short covering and trade houses becoming less active.

The Brent/Dubai complex saw a bullish shift with May’25 Brent/Dubai surpassing -$1/bbl for the first time since mid-March. In contrast to flat price, differentials were unresponsive to OPEC+ speeding up its oil output hike. The bullish catalyst was Aramco cutting its May OSP to its lowest level in four years. Short covering flows from trade houses and funds exacerbated the upwards move.

The Brent/Dubai complex saw a bullish shift with May’25 Brent/Dubai surpassing -$1/bbl for the first time since mid-March. In contrast to flat price, differentials were unresponsive to OPEC+ speeding up its oil output hike. The bullish catalyst was Aramco cutting its May OSP to its lowest level in four years. Short covering flows from trade houses and funds exacerbated the upwards move.

The weakness we have seen in the Brent/Dubai complex in recent months has continued, with the Apr’25 contract steadily declining from around -$0.90/bbl on March 11 to -$1.35/bbl by March 20. This downward trend accelerated sharply on the morning of 20 Mar, following reports of new US sanctions targeting Chinese teapot refiner Shandong Luqing Petrochemical for purchasing significant volumes of Iranian crude oil. As the market weighed up this headline, Apr’25 Brent/Dubai plunged to -$2.03/bbl by the afternoon of 20 Mar — marking the lowest level for the M1 contract since early February…

The past two weeks saw rapid fluctuations in price action, reinforcing the high volatility regime that has marked Brent/Dubai since the start of the year. As OPEC+ confirmed their plans to proceed with its long-delayed production increase of 138kb/d beginning in April, prices in Brent/Dubai spiked higher, with Apr’25 rising from -$1.01/bbl on 27 Feb to intraday highs of $0.04/bbl by 04 Mar. However, the gains were quickly reversed as the Brent/Dubai complex saw consistent selling. As a result, Apr’25 fell to -$1/bbl where it found technical support. This time, the downtrend was uniform down the forward curve, with deferred tenors reaching new lows, as players seek to capture the roll-down trade. This is in complete contrast to the sell-off in January, which was localised to the front. A snapshot of the Brent/Dubai forward curve reveals an orderly contango, with the exception of the Bal-Mar/Apr box, which is positive.

M1 Brent/Dubai showed promising signs of a recovery after the Mar’25 contract rallied from an intraday low of -$0.69/bbl on 07 Feb up to near flat at -$0.06/bbl on 14 Feb, however, has now plunged even further down to -$0.83/bbl at the time of writing on 25 Feb. We are now testing the -$0.80/bbl support level last seen on 20 Feb where Mar’25 Brent/Dubai found a floor from its weakness. Fears of US sanctions on Iranian crude over the past fortnight largely gave strength to the Dubai spreads, with Mar/Apr’25 Dubai increasing from a February low of $0.51/bbl on 13 Feb up to a fortnightly high of $0.77/bbl on 20 Feb. Now that the US has hit Iran with more than 30 sanctions on entities, individuals, and vessels involved with the shadow fleet, we expect the front Dubai spreads to remain relatively supported. Onyx COT data shows there was 4.75mb of buying flows in Mar’25 Dubai outright while the Apr/May’25 Dubai spread saw 1.33mb in buy-side interest this fortnight.

After the M1 Brent/Dubai contract fell to all-time lows in our last report, down to an intraday low of almost -$2.60/bbl on 28 Jan, there almost seemed no limit to bearish sentiment. However, the contract has found some momentary respite, recovering from a weekly low of around -$0.70/bbl on 07 Feb up to an intraday high of -$0.34/bbl on 11 Feb amid support in Brent crude. This resurgence was also a function of weakness in Dubai spreads, with the prompt Mar/Apr falling from over $1/bbl on 16 Jan to $0.70/bbl at the time of writing. Notably, trade houses were seen buying the front Dubai spreads against Onyx this week, buying almost 1.4mb and 500kb in the Mar/Apr and Apr/May Dubai spreads, respectively.

As the Middle Eastern crude market continues to tighten due to supply tightness fears from the prospect of further sanctions pressure on Russia, the front-month Feb’25 Brent/Dubai swaps contract reached an all-time flow of -$2.50/bbl, while the Feb/Mar box fell to -$1.90/bbl. However, ahead of the Chinese New Year holiday, paper market flows have been less one-directional, with better selling interest observed in Dubai spreads and buying interest in Brent/Dubai. However, trade houses remain substantial sellers of Brent/Dubai boxes.

Nothing escapes the law of gravity, but the M1 Brent/Dubai has done much more than that, falling just shy of a low last registered in November 2023. As we write this, the front-month Brent/Dubai has fallen to -$0.80/bbl, having been at +$0.21/bbl on 8 Jan.

Brent/Dubai has continued its downward grind, with the M1 contract falling to its lowest level since July. The Jan’25 contract reached lows of $0.10/bbl on 17 Dec, while the entire forward curve has shifted lower in an orderly fashion. The contango in the Brent/Dubai boxes is very orderly, without any kinks on the curve (see appendix). The medium sour crude market has continued to tighten as OPEC+ delayed their output hikes to Q2’25. Despite buying some time and supporting flat prices, our global crude balance suggests a bearish picture for 2025, with OPEC+ possibly needing to defer their output hikes further.

The Brent/Dubai continues to narrow, with the front-month contract falling below $0.50/bbl, the lowest level for a front-month contract since September. On paper, Dubai crude has gained much of the strength lost in previous months. The fundamental story suggests a bullish market reaction to the expectation of OPEC+ prolonging their output cuts into Q1. Previously, the Brent/Dubai forward curve had priced in the expectation of extra barrels, which has supported outright levels. The entire forward curve has shifted lower from $1/bbl to around $0.80/bbl. We have officially returned to the ‘standard’ regime of Brent/Dubai selling, and Dubai spread buying, as evidenced by our market positioning data.

November continues to be a lacklustre month in the Brent/Dubai complex as market participants gradually retreat and become more risk-off leading up to Christmas. Glance no further at open interest levels where market risk is focused in the front tenors (Nov’24, Dec’24, Jan’25), which have plateaued and declined recently. In contrast, open interest in the deferred contracts is roughly in line with their 5-year average. Reaction to fundamental news has been lacking, which has instead been focused on Brent. Perhaps some normality is much needed after a whirlwind couple of years.

The key detail this fortnight has been the dichotomy between the Bal-Nov/Dec’24 and the Dec/Jan’25 Brent/Dubai boxes. The Balmo box initially saw trade house and producer selling, taking it down 12c d/d at the start of November to $0.15/bbl.

The Brent/Dubai market saw another tumultuous fortnight that ultimately resulted in an upwards shift in the prompt tenors. Cal25 has been comfortably supported at the $1/bbl level. However, the main story has been in the front, where the Nov’24 Brent/Dubai initially threatened to break below $1/bbl on multiple instances before rallying above $1.20/bbl on weakness in Nov’24 Dubai. As Nov/Dec Dubai witnessed aggressive selling…