Oman crude oil trading on the Dubai Mercantile Exchange continued to consolidate in the low US$60 per barrel range last month, as prices held up relatively well despite surging Opec production, the possible easing of international sanctions on Iran and the latest financial turmoil in Europe.
The monthly average crude price of the DME for June, which Oman and Dubai use to set their official selling price, was $61.84 per barrel, down from $63.62 in May. September-loading Oman crude closed at $60.13, a small drop from the $61.62 contract settlement price in May, but overall prices traded in a relatively narrow trading range of between $60 and $64.
Prices averaged $57.06 per barrel in the first six months of this year, compared with $105.05 in the first half of last year. But in the past two months Oman has largely found an equilibrium at between $60 and $65 per barrel, the most stable trading range since the oil price collapse started last July.
Although the early Opec meeting last month predictably maintained the official output quota at 30 million barrels per day (bpd), early reports suggest that Opec production in June exceeded 31.5 million bpd, which Reuters noted was a three-year high for the group.
“Although the market has been remarkably tolerant of it, rising Opec production has been a key element in the global supply and demand surplus, and early indications suggest that very much remained the case in June,” said Tim Evans, an energy futures specialist at Citibank.
The Reuters report noted the biggest increase last month came from Iraq, where exports from southern Iraq jumped to 3 million bpd, while Saudi Arabia continues to pump oil at about 10.5 million bpd.
The already high production levels in the Middle East have led to fears that a lifting of sanctions on Iran would add to a potential supply glut, although analysts have pointed out that it would take several months for Iran to step up export levels.
The continuing turmoil in Greece also added another layer of uncertainty, as a knock-on effect could dent the already fragile European economy and hamper oil demand.
Meanwhile, China comfortably remained the top buyer of Oman crude, according to the latest export figures released by Oman’s oil ministry. Almost 20 million barrels from the May loading programme is scheduled to discharge in China, out of the total export programme of 24.5 million barrels.
Demand for physical Oman crude on the DME remains strong, with more than 19 million barrels of crude scheduled for delivery next month, the third-highest on record, having exceeded 20 million barrels twice this year.
The new front-month September DME contract was trading just above $60 this month, but Oman was performing relatively well against its North Sea benchmark counterpart with the Brent versus Oman spread narrowing to about $1.50 per barrel, compared with more than $2 per barrel last month.
Paul Young is the head of energy products at DME.
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