Middle East sour crude complex higher on prospect of market rebalance

Singapore — The Middle East sour crude complex were higher Thursday morning in Asia, taking bullish cues from reports of a potential coronavirus treatment, as well as continuing dialogue between OPEC+ delegates on additional supply cuts to rebalance oil markets.

Brent crude futures extended the rally on the news, but were overshadowed by the subsequent move in Dubai futures mid-morning Thursday, with the April Brent/Dubai Exchange Futures for Swaps spread tightening to $1.10/b as of 11 am in Singapore (0300 GMT). The spread had been assessed at $1.31/b at the 0830 GMT close of trading in Asia on Wednesday.

Oil futures rallied after news broke late Wednesday that a Chinese university had found a potential treatment for the virus, that has caused 492 deaths -- most of them in China, since it first came to light in end-December.

Intermonth Dubai crude futures structure also posted gains Thursday morning, with market watchers taking bullish cues from continued dialogue between OPEC+ delegates beyond their intended Wednesday deadline.

The fact that delegates are returning for more talks indicates that not all hope is dead for a deal to be struck, said Helima Croft, global head of commodity research for RBC Capital Markets, who was in Vienna to track the negotiations. Failure to deliver on an agreement Thursday, however, could result in a sharp market sell-off, she added.

"If it were intractable, they would have left by now," Croft said. "I think it is a quest for consensus still. But certainly it shows that this is not easy."

The March/April Dubai crude futures spread rose from its 12 cents/b assessment on Wednesday evening in Asia (0830 GMT) to 19 cents/b Thursday morning after Asia markets had time to digest the news.

Similarly, the April/May spread rose to be pegged at 21 cents/b Thursday, after being assessed at 12 cents/b at Wednesday's close.

The key advisory committee will extend their talks to a third day, with Russia still demurring on committing to deeper production cuts, according to sources involved in the discussions. The committee is scheduled to try again at 9 am local time (0800 GMT).