ICE Brent

ICE Brent: ICE Brent crude oil prices increased from $84-86 in early October to a high of $93 on 19 October, before coming under sustained downward pressure; however, oil markets were choppy, prices did not trend lower in a straight line, and volatility was elevated. Bearish macro headwinds gathered pace, more than offsetting bullish concerns that the Middle Eastern crisis could disrupt the region’s oil supplies.

Crude prices spiked by around $4 immediately after the 7 October Hamas attack on Israel, bringing geopolitics sharply into focus. The war risk premium oscillated over the course of October, sending price volatility to 2023 highs as fears of an escalation in the conflict ebbed and flowed. The turbulence occurred as bullish investor sentiment crumbled, which ultimately helped push prices lower. Bond yields soared to their highest level since the global financial crisis, as anxiety about hawkish central bank policies was compounded by fiscal concerns. The sell-off seen in the second half of October continued unabated into the first half of November, with Brent trading around $82 at the time of writing.

ICE Dubai (medium sour) vs. ICE Brent

Sour crude grades including Dubai saw continued support from ongoing OPEC+ production cuts led by Saudi Arabia, continued losses of Kirkuk exports from northern Iraq to the Mediterranean, and persistent hikes in official selling prices (OSPs) for Middle Eastern crudes.

In the Middle Eastern market, higher OSPs prompted many term buyers to seek spot barrels from other regions. Over the first half of October, the spot market for Dubai also gained support due to the widening of the Brent vs. Dubai EFS (i.e., a stronger Brent premium vs. Dubai). This made Dubai-linked crude grades more attractive to Asian refiners. The flattening of the Dubai curve throughout the month also improved arbitrage economics, resulting in increased demand from Japan and Korea as they prepared for the winter months.

ICE Murban (light sour) vs. ICE Dubai

ICE Murban’s premium to ICE Dubai remained under pressure through October and into the first half of November. As a high quality light sour grade that competes with light sweet crude, the relaxed light sweet crude market dampened Murban values. In addition, strong flows of light sweet Midland from the US to Asia provided Asian refiners with an attractively priced alternative to Murban.

Asian refined product markets

In Singapore, medium sour margins in cracking refineries were materially weaker in October versus September, falling by $5.60 m-o-m, according to the International Energy Agency. Asian refining margins were pressured by higher sour crude prices and rising freight costs. On the refined product side of the equation, weak naphtha and fuel oil cracks also contributed to softer margins.