Dubai Crude Falls to Low Against Oman as Traders Wary of OPECBy
OPEC deal to cut output would curtail Dubai-linked crudes
Oil traders reluctant before OPEC ministers meet in Vienna
The possibility that OPEC will finalize a cut in oil production is weakening the price of Dubai crude against the Oman grade and global benchmark Brent.
Dubai crude, a marker for Middle Eastern oil traded from the Suez Canal to Japan, dropped Monday to its lowest level against Oman this year, according to data compiled by Bloomberg and figures from S&P Global Platts. Dubai traded at $2.125 a barrel less than Oman on the Dubai Mercantile Exchange, according to the data. The United Arab Emirates, which includes Dubai, is an OPEC member, while Oman isn’t.
Traders are reluctant to buy in the Dubai market in case the Organization of Petroleum Exporting Countries cuts output of several of the crudes that comprise the Middle Eastern benchmark, Matt Stanley, a Dubai-based oil broker at Freight Investor Services, said by phone. OPEC’s 14 members are to meet Wednesday in Vienna to decide how to implement a production decrease aimed at bolstering global prices.
“If barrels do get cut, people will be looking to buy Brent and sell Dubai,” as traders will seek alternate grades to fulfill supply contracts, Stanley said. OPEC will probably agree on a deal, he said. “It just depends on what that is. Traders are really sitting on their hands.”
Supplies linked to Brent, a basket of North Sea crudes, come from countries outside OPEC and, like Oman, would be less restricted in the event of a cut, Stanley said.
Brent strengthened against Dubai with the spread between the two grades widening to $4.335 a barrel on Monday.
Oil producers and traders buy and sell Middle Eastern crude and refined products based on a price assessment published by S&P Global Platts. Companies taking delivery of full cargoes of crude bought through Platts can receive several oil blends: Dubai, Oman, Al Shaheen from Qatar, or Abu Dhabi’s Upper Zakum or Murban.
Abu Dhabi, in the U.A.E., and OPEC member Qatar would also have to cut supplies if the group agrees to curb output.