Middle East crude spreads widens after Iran's retaliation

Singapore — Benchmark Dubai crude futures spreads widened following news that Iran had launched missiles striking two US military bases in Iraq, although the rally seemed muted relative to the sharp jump in front month NYMEX and ICE Brent futures prices, which rose between $2/b and $3/b Wednesday morning.

Dubai intermonth spreads widened on the news, but the backwardated market structure did not expand beyond $1/b as they had when news of Iranian General Qassem Soleimani's death broke.

Crude brokers in Asia said they were advising clients to stay calm and wait for prices to stabilize before executing any major orders.

"Better [to wait] until the market has calmed down," one broker said.

"Someone hit March Brent this morning at $71.75/b, now its trading at $70/b, or even lower."

The Dubai February/March spread was pegged at 99 cents/b at 10 am in Singapore, whereas it had been assessed at 90 cents/b a day ago.

Similarly, the Dubai March/April spread was pegged at 97 cents/b Wednesday morning, up from 91 cents/b assessed on Tuesday.

Traders of Middle East crude oil said Wednesday morning in Asia that supply security remained their number one concern in the ongoing crisis.

"Supply disruption is the main thing," a trader with a Southeast Asian refiner said.

Analysts see major risks to Iraq's crude supply if the conflict escalates.

Iraq pumped 4.68 million b/d in November -- close to 5% of global crude output, according to the latest S&P Global Platts survey of OPEC production.

March Dubai futures rose $1.77/b to be pegged at $67.91/b at 10 am in Singapore on Wednesday, compared to the Asian close on Tuesday at 0830 GMT.

The move was largely in step with a $1.84/b rise in March ICE Brent futures, which was pegged at $70.31/b at 10 am (0200 GMT) on Wednesday morning in Singapore.

The Brent reaction outpaced the move in Dubai however, with the March Brent/Dubai Exchange of Futures for Swaps spread widening slightly to be pegged at $2.40/b. It had been assessed at $2.33/b at Tuesday's Asian close.

Iranian state TV said Tehran had started an attack on US facilities in Iraq in retaliation for last week's US drone strike in Baghdad that killed General Qassem Soleimani.

The US Department of Defense said Tuesday night that Iran launched more than a dozen ballistic missiles at bases housing US troops.

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

-- Edited by Norazlina Jumaat, norazlina.jumaat@spglobal.com