CRUDE MOC: Dubai spread falls to 7-month low on Q2 demand concerns

Singapore — Benchmark cash Dubai's premium to futures dropped to a seven-month low Monday, the start of the April trading cycle in the Middle East sour crude market, as the market adjusted to expectations of a low demand period over the second quarter.

The April Dubai cash/futures spread was assessed at 88 cents/b at 4:30 pm in Singapore (0830 GMT) at the end of the Platts Market on Close assessment process on Monday.

Previously, the March Dubai cash/futures spread ended the month of January at a backwardation of $1.92/b, while averaging $2.11/b over the month.

The Dubai cash/futures spread is considered a core market indicator for setting official selling prices in the Middle East sour crude market. The big drop between January and February may imply deep price cuts from producers such as Saudi Aramco and others in the region.

April cash Oman's premium also came off sharply compared to Friday, January 31. Oman's premium to April Dubai futures was assessed at 97 cents/b on Monday, down from $1.92/b for the March spread on Friday.

The Platts Market on Close assessment process saw five Dubai partials change hands on the first trading day of the month. Koch, Shell and Unipec were amongst the sellers, and Gunvor and Lukoil on the buying side. All five partials of 25,000 barrels each traded at an outright price of $55.20/b.

Meanwhile, the Brent/Dubai Exchange Futures for Swaps spread narrowed day on day for April, as global crude oil prices slid alongside market sentiment relating to the spread of the coronavirus.

The April EFS was assessed at $1.70/b at the 0830 GMT close of trading in Asia, down from $1.85/b assessed on Friday.

More airlines were seen canceling flights to China this week, and land, sea and air trade in and out of the country is expected to be impacted as well.

The outbreak is expected to blunt global oil demand by at least 900,000 b/d in February and 650,000 b/d in March, according to S&P Global Platts Analytics. In a worst-case scenario involving travel curtailments, demand could drop by up 2.6 million b/d in February and 2 million b/d in March.