Middle East sour crude complex rangebound on global demand concerns

Singapore — Middle East sour crude spreads, led by benchmark Dubai crude futures, was a tad subdued mid-morning Friday in Asia on concerns of a global demand and economic slowdown tempering the possibility of deeper OPEC production cuts in second-quarter 2020.

At 11 am in Singapore on Friday (0300 GMT), the March Brent/Dubai Exchange of Futures for swaps was pegged at $2.50/b, down from $2.59/b assessed at the close of trading in Asia on Thursday (0830 GMT).

Slower seasonal demand for Middle East crude oil during the first few months of 2020 had narrowed the backwardation in the Dubai futures curve sharply in recent weeks, with the coronavirus contagion adding to bearish demand sentiment.

The Dubai cash/futures spread -- also known as the M1/M3 spread -- was assessed at $1.44/b Thursday, down from the 2019 peak of $3.08/b touched on November 14, Platts data showed.

Sour crude spreads were unfazed by OPEC's call for an earlier than scheduled meeting to address the issue of balancing the market in light of the coronavirus outbreak, which has now spread to over 20 countries worldwide.

The February/March Dubai crude futures spread continued to narrow, and was pegged at 41 cents/b Friday morning, having been assessed at 43 cents/b at the Asian close on Thursday. The spread was assessed at 67 cents/b at the start of the week on Tuesday.

The March/April Dubai crude futures spread narrowed as well, having been pegged at 43 cents/b at 11 am in Singapore on Friday. It was assessed at 47 cents/b on Thursday at 4:30 pm (0830 GMT).

The spread of the coronavirus, which has sickened more than 7,000 people globally, has led to fears of an economic contraction in China, where the infection started and has killed at least 132. China is the biggest crude importer and is a key market for several OPEC members, but many Chinese refineries have already slashed their crude runs.

But even if OPEC+, a coalition of OPEC and other oil producers, were to move its meeting to next week and agree to rein in more production to prop up prices, the physical oil market would most likely see a delayed impact on supply re-balancing.