DUBAI FUTURES: Middle East crude benchmark plunges 30% on Saudi OSP cut - S&P Global

Highlights

Dubai futures down 33% at $32.60/b

Brent/Dubai EFS widens to more than $1/b after lowest on record Friday

Intermonth Dubai spreads weaken to near $1/b contango

Singapore — Dubai crude futures extended losses amid a sharp plunge in global crude oil prices to touch four-year lows Monday afternoon, with markets bracing for an inevitable response to Saudi Aramco's price cuts from other producers due to issue their official selling prices this week.

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The May Dubai futures contract extended beyond a 30% plunge Monday morning to be pegged at $32.60/b by 3 pm in Singapore (0700 GMT), or around 33% lower compared to its Friday close.

The contract was last assessed lower at $31.43/b on February 29, 2016, according to S&P Global Platts data. Later the same year, OPEC and non-OPEC producers first formed the alliance to implement production cuts that effectively expired when talks broke down in Vienna last week.

Market participants in Asia said they were fairly certain other producers would emulate Saudi Arabia in cutting official selling prices to the region heavily, after the OPEC kingpin slashed crude oil price differentials by as much as $6/b over the weekend.

"Saudi must have discussed [the price cuts] with others like Kuwait and SOMO definitely as those are usually in line," said a refinery-linked trading source.

"We are trying to wait and gauge spot market reaction for the time being, and whether remaining producers will follow or not. Is it just Saudi alone, or everyone will follow?" the source added.

The fall in Dubai crude futures continued to outpace the decline in global crude oil prices, given the impact of Aramco's announcement on Middle East crude markets.

At 3 pm Singapore time, the May Brent/Dubai Exchange of Futures for Swaps spread was wider at $1.17/b, compared to $1.12/b at 9:45 am Monday morning in Singapore. It was assessed at 16 cents/b at Friday's Asian close, ahead of the conclusion of OPEC+ talks led by Saudi Arabia and Russia.

With Russia declining to agree to further production cuts, Saudi Aramco slashed its official selling price differentials globally for April-loading barrels over the weekend, with certain grades seeing their biggest month-on-month cut ever, according to Platts data.

"The price war is on as well as the fight for market share," said a Singapore-based trader.

"With Saudis, this was a clear message and it is obvious who they are targeting, especially if you look at the price cuts for Europe," the trader added.

(Updated at 0827 UTC; adds details throughout, updates prices)

2020-03-09 02:58:00Z
https://www.spglobal.com/platts/en/market-insights/latest-news/oil/030920-dubai-futures-middle-east-crude-benchmark-plunges-30-on-saudi-osp-cut