Dubai futures spreads narrow despite OPEC efforts to address market balance

Singapore — The Middle East sour crude complex, led by benchmark Dubai crude futures spreads, weakened on global economic slowdown concerns during mid-morning trading hours in Asia Thursday, even as OPEC said it may convene earlier than planned to address "market balance."

"It is very likely to advance to February the OPEC meeting, initially scheduled for the beginning of March, so that we can find the means to ensure market balance," Algerian energy minister Mohamed Arkab said Wednesday, according to state news agency APS.

The meeting was initially scheduled for March 5-6, but market watchers said falling oil prices and global economic slowdown concerns brought on by the rapid spread of the coronavirus could prompt OPEC to bring the date forward.

Despite OPEC's efforts, intermonth spreads for Dubai crude futures fell Thursday from the 60s cents/b range they have been trading in for most of the week as concerns about the impact of the coronavirus on the Chinese and global economies accelerated. The February/March spread seen at 57 cents/b at 11 am Singapore time (0300 GMT), after being assessed at 62 cents/b at the 0830 GMT close of trading in Asia Wednesday .

Similarly, the March/April spread was pegged at 57 cents/b at 11 am, narrowing from 64 cents/b at Wednesday's close in Asia.

The Dubai cash/futures spread, an indication of spot market sentiment for Middle East sour crude, has averaged $1.61/b so far this week, sharply lower than the $2.08/b averaged over January 20-24, S&P Global Platts data showed. Weaker demand from Asian refiners due to turnarounds and alternate supply sources has also kept Middle East sour crude prices in deep discount in the spot market.

Analysts say deeper production cuts may be on the table for the upcoming OPEC meeting in order to buoy falling oil prices. OPEC and 10 allies agreed in December to implement 1.7 million b/d of production cuts for the first three months of 2020, and to meet March 5-6 in Vienna to decide on any next steps.