Brent v Dubai

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…

Brent/Dubai witnessed a turbulent week despite the quiet backdrop of Golden Week in China. The complex first saw support towards the end of September amid news of a long-awaited stimulus package announced by the People’s Bank of China on 24 Sep….

It was a paradigm shift in the Brent/Dubai crude market as the orderly downtrend in Brent/Dubai gave way to a mighty rally on 26 August following Brent’s rally on the Libyan supply disruption news. The Sep’24 Brent/Dubai widened from $0.30/bbl to highs of $0.90/bbl. Nonetheless, the complex is entering September pricing on a strong note, with the Sep/Oct Brent/Dubai box suppressed below -$0.30/bbl. In contrast, outright prices in the deferred have returned to previous highs above $1/bbl.

Light crude, not-so-light selling. That has been the spotlight in Brent/Dubai over the past week, with the Oct’24 contract descending from over $1/bbl at the end of August to $0.50/bbl on 10 Sep (at the time of writing).

It was a paradigm shift in the Brent/Dubai crude market as the orderly downtrend in Brent/Dubai gave way to a mighty rally on 26 August following Brent’s rally on the Libyan supply disruption news. The Sep’24 Brent/Dubai widened from $0.30/bbl to highs of $0.90/bbl. Nonetheless, the complex is entering September pricing on a strong note, with the Sep/Oct Brent/Dubai box suppressed below -$0.30/bbl. In contrast, outright prices in the deferred have returned to previous highs above $1/bbl.

The strength emerged from a pitiful Dubai complex riddled with selling flow on the back of bearish macroeconomic data and the sell-off within wider risk assets

Brent/Dubai has seen a remarkable fortnight, with the soon-to-be-Bal Aug Brent/Dubai rallying above $1/bbl on 26 July. However, we now see cracks in this rally, with the contract softening to $0.80/bbl on 30 July.

A fortnight of two halves in Brent/Dubai, encapsulating the market’s duality in the year-to-date. The first week was relatively rangebound as prices hovered around -10c/bbl, with volumes low due to the US holiday. As Brent and WTI rallied, Dubai did not follow up as aggressively. This resulted in a massive rally where Aug jumped from -10c/bbl to +40c/bbl in a week, with the banks and funds being the buy-side aggressors.

It seems like the flipping of the calendar month has brought with it a debilitation of Dubai’s strength. The prompt contract has returned to what would be arguably ‘normal’ positives, considering the makeup of the barrel.

It seems like the flipping of the calendar month has brought with it a debilitation of Dubai’s strength. The prompt contract has returned to what would be arguably ‘normal’ positives, considering the makeup of the barrel.

Following a period of extraordinary weakness in crude, with Brent and Dubai both falling over $6.50/bbl between May 29 and Jun 03, there has been no shortage of interesting price action.

Dubai Bling – Two weeks ago, the prompt Brent/Dubai appeared to be hitting a bottom at -14c/bbl with players anticipating a recovery upwards in the near term.

MurbanMania – Overall bearish price action in Brent/Dubai has been unsurprising and the rolldown is generally expected.

The May Brent/Dubai recorded a feeble fortnight amid prices coming off from a high of $1.10/bbl on Apr 12 to sub-zero territory less than a week later with the move downwards exacerbated by players stopping out of length.

The past fortnight forced the May Brent/Dubai out of its range, with price action plummeting from +15c/bbl on Mar 25 to a low of -40c/bbl on Apr 02.

And just like that the OPEC meeting came and went. Jan slipped to a low of -40c/bbl on Nov 30 following the meeting as Dubai bulls half-heartedly sold into the immediate aftermath, letting prices peak below the lower Bollinger Band. Then as we collectively turned our pages on our calendars (us who still use paper) the Dubai bulls lost control and prices began to rally.