Dubai futures spreads extend decline on worsening demand outlook

Singapore — Dubai crude futures spreads fell deeper into its prevailing contango structure as markets opened in Asia Monday morning amid renewed fears of oil demand weakening in the region, largely spurred by the rising death toll and spread of the coronavirus through China and nearby countries.

Dubai crude traders were "rushing to sell since [this] morning]," a crude broker said Monday, adding that intermonth values quoted for Dubai crude futures spread were seeing increased volatility.

The March/April Dubai crude futures spread, which had been assessed at minus 13 cents/b at the 0830 GMT Asian close on Friday, was down to minus 26 cents/b by 11 am Monday morning (0300 GMT) in Singapore.

Further along the curve, the April/May spread was also weaker, being pegged at minus 15 cents/b Monday, compared with the minus 4 cents/b assessment on Friday.

The latest death toll from the coronavirus rose past 900 in China, with nearly 40,000 people infected in the country, alongside rising numbers for countries across SouthEast Asia, including Singapore, according to regional news reports early Monday.

Oil prices declined globally, plagued by the prospect of falling demand from Asia, especially China -- one of OPEC's largest crude importers -- as its economic activity slows down, while battling the epidemic.

The fall in ICE Brent futures mirrored that in Dubai, with the April Brent/Dubai Exchange of Futures for Swaps spread pegged at 72 cents/b as of 0300 GMT. It had been assessed at 73 cents/b at the Asian close on Friday.

Surrounding countries in East and Southeast Asia have also seen the number of infected cases climb, with governments starting to effect measures to stop the spread of the virus.

Hopes for a respite from weaker demand in the form of shorter oil supply faded over the weekend, with OPEC's efforts to impose additional supply cuts stalled by Russia.

With further cuts an unlikely possibility at the moment, OPEC+ ministers have kept their March 5-6 meeting in Vienna as scheduled for now, instead of moving it forward. Any deal would require unanimous approval of the entire OPEC+ coalition, composed of OPEC, Russia and nine other allies.