DUBAI FUTURES: Brent/Dubai EFS narrows to 9-month low on deescalating US-Iran tension

Singapore — Benchmark Dubai crude futures' discount to ICE Brent narrowed to the lowest in nine months during mid-morning trade in Asia Monday, even as global crude markers stabilized, following a drop late Friday, on the back of the deescalation in tensions between the US and Iran.

The March Brent/Dubai Exchange of Futures for Swaps spread narrowed Monday morning in Asia to be pegged at $1.87/b, down from $1.91/b assessed at the close of trading in Asia on Friday.

The spread tightened as Brent fell further than Dubai futures mid-morning Monday since the 4.30pm Singapore close on Friday.

Front-month March Brent futures was pegged at $64.99/b at 11 am on Monday (0300 GMT) in Singapore, down 42 cents/b from $65.41/b at the Asian close (0830 GMT) Friday.

Dubai futures, meanwhile, fell 38 cents/b from $63.50/b assessed at the Asian close Friday, to $63.12/b at 11 am Singapore time on Monday.

ICE Brent had fallen from last week as the market shed risk premiums in the wake of softened US rhetoric toward Iran, analysts said.

"US-Iran tensions appear to have come and passed very quickly in the past couple of sessions with the attention now shifted back to the key items from the beginning of the year," IG's market strategist Pan Jingyi said, adding that the key items include the signing of the US-China trade deal.

US and China are expected to sign the phase one deal this week with ANZ analysts noting that sentiment has been "generally positive".

Risks for crude remain on the upside, however, analysts said.

"We expect tensions between the US and Iran to remain high for now and factoring in other Middle East unrest (Turkey-Libya and other civil uprisings), we expect risks for crude oil to be tilted towards the upside," OCBC Bank analysts wrote in a report on Monday.

Dubai intermonth spreads, or the Dubai market structure, were relatively steady mid-morning Monday with the February/March Dubai futures spread pegged at a backwardation of 98 cents/b, while the March/April spread was pegged at 93 cents/b.

This compares with 99 cents/b for the February/March Dubai futures and 93 cents/b for March/April assessed at 4:30 pm in Singapore on Friday.