SINGAPORE - Middle East crude benchmarks Dubai and Oman hit their lowest levels since 2022 as low pre-holiday liquidity, soft demand from top buyers China and Japan, and a prompt Omani oil sale weighed on the market, according to Reuters data and traders.

The fall in benchmark prices may prompt world's top exporter Saudi Arabia to cut February term prices for a second straight month, traders said, despite extending its voluntary supply cut as part of OPEC+'s strategy to support prices.

Cash Dubai and DME Oman futures weakened to discounts of 46 cents and 65 cents a barrel against Dubai swaps at Monday's close, levels not seen since 2020, Reuters data showed.

Meanwhile, Murban crude futures, which briefly slipped into negative territory last week, recovered to a premium of 27 cents to Dubai swaps.

The benchmarks are used to price about 18 million barrels per day of oil exported from the Middle East and Russia, accounting for nearly 18% of global supply.

"Generally, liquidity has been poor," an analyst with a trading firm in Singapore said.

He added that a tender issued by Oman's energy ministry last week to sell crude loading this month spooked traders who cut their long and short positions in Dubai spreads and Brent-Dubai spreads, respectively, causing prices to tumble.

Middle East cargoes typically trade two months ahead to account for the time it takes to ship oil to Asia.

QatarEnergy has also sold four crude cargoes loading in February at discounts, the lowest levels since 2020.

In addition to slowdown in demand from China and Japan, traders said refineries across Asia are headed for seasonal maintenance from March that will reduce demand.

Some Japanese refineries had suffered outages which reduced appetite for spot cargoes, the sources added, speaking on the condition of anonymity.

"This month demand is super slow," a Singapore-based trader said.

A buyer at a North Asian refiner said some buyers brought forward their spot purchases to earlier this month because of the year-end holidays.

Unipec, the trading arm of Asia's largest refiner Sinopec, had been purchasing more arbitrage supplies from Brazil and West Africa in recent months, reducing its demand for Middle East oil, traders said.

Big Chinese refiner Rongsheng Petrochemical has also been absent in the spot market, as it will be increasing purchases of Saudi term supplies from January, they added.

Another industry source said there was simply too much supply in the market from Iran, the U.S., Venezuela, Brazil and Guyana.

However, the first analyst expects the market to ride out the last two weeks of 2023 and rebound in January.

"When January comes, I expect bulls to re-emerge," the analyst said.

(Reporting by Florence Tan; Editing by Varun H K)