Middle East crude futures hold steady on expected supply tightness - S&P Global

Singapore — Benchmark Dubai crude futures' discount to ICE Brent futures widened in midmorning trading hours on Thursday, but kept under its key $3/b threshold amid continuing tightness in Middle East sour crude supply to Asia.

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The March Brent/Dubai Exchange of Futures for Swaps, or EFS, spread was notionally pegged at $2.73/b at 11 am in Singapore (0300 GMT) on Thursday, the first trading day of the new March-loading cycle for Middle East crude in Asia. At the close of trading in Asia on Tuesday at 0430 GMT, the same spread was assessed at $2.65/b.

Brent prices pulled up Thursday morning on bullish global fundamentals, along with a shorter expected loading program for north Sea crude.

Arbitrage flows of crude from Europe to Asia could help ease tighter supply of Middle East crude into the region, but a shorter loading program in the north Sea could imply fewer arbitrage barrels flowing eastward, said market participants.

Dubai futures spreads held steady day on day, with the February/March spread for Dubai crude pegged notionally at 81 cents/b at 11 am in Singapore Thursday. It was assessed at 82 cents/b on Tuesday.

Similarly, the March/April spread was pegged at 81 cents/b Thursday morning, unchanged from its assessment on Tuesday.

In Asia, crude market participants were also waiting for fresh official selling prices that are expected to be issued by producers, such as Saudi Aramco, Abu Dhabi National Oil Co. and Qatar Petroleum, in the coming days.

Traders largely expect to see prices of light sour crude grades such as Murban, Das Blend and Arab Extra Light cut month on month due to weakening naphtha product margins.

The backwardation in Dubai cash/futures also weakened slightly between November and December, making a compelling case for OSP cuts, said traders.

The cash/futures spread averaged $2.67/b over December, which is down from $2.82/b averaged over November, S&P Global Platts data showed.

Middle East producers are understood to track the backwardation between Platts front-month cash Dubai and second-month futures when determining monthly prices for their crude grades flowing to Asia.

-- Eesha Muneeb, eesha.muneeb@spglobal.com

-- Edited by Manish Parashar, newsdesk@spglobal.com

2020-01-02 04:33:00Z
https://www.spglobal.com/platts/en/market-insights/latest-news/oil/010220-middle-east-crude-futures-hold-steady-on-expected-supply-tightness