The divergent assets of crude oil-derived fuel products impact two oil benchmarks more than the supply situation on the market.
US sanctions against Venezuelan and Iranian oil, as well as production cuts by the Saudi Arabia-led OPEC + group, are leading to a shortage of heavy to medium “acid” crude oil that is sulfurous and dense. The American slate boom provides plenty of clean and lighter supplies on the market.
It therefore suggests that prices for just sour sour crude – reflected in the Dubai Oil Benchmark – should increase against the Brent price, which is sweet stocks. But the opposite is the case. The strength between the two shows that Middle Eastern oil has been at the weakest level since December.
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Dubai’s rebate on Brent, measured by the swap exchange rate for futures, rose to nearly $ 1.50 a barrel this month, compared to 19 cents in early March, data from PVM Oil Associates Ltd. show.
According to a Bloomberg survey of four dealers and analysts, Dubai’s weakness over Brent is fueled by divergent margins in converting crude oil into gasoline and fuel oil.
Crude oil usually provides more marine propulsion for dirty fuel oil, the profits of which fall. This is ahead of next year’s stringent regulations that require the use of cleaner burning fuels in ships traversing oceans around the world.
At the same time, gasoline surges from a loss of $2 a barrel in late January to a profit of more than $7 in March. Brent-linked-sweet-fry yields more of the cleaner-burning engine fuel than sour oil such as Dubai. That’s boosting the relative price strength of Brent versus the Middle East benchmark, according to an April 2 report from industry consultant FGE.