Uptick in volatility as Dubai crude futures spreads strengthen amid Rosneft sanctions

Singapore — Dubai paper trading saw an uptick in volatility Wednesday morning in Asia with spreads moving slightly higher after the US imposed sanctions on Russian oil and gas giant Rosneft overnight.

Intermonth crude futures spreads "kept on moving", crude brokers based in Singapore said Wednesday morning.

The news buoyed global crude prices overnight, but the rise in the Middle East sour crude complex was tempered by demand-side fundamentals and ample supply from the Persian Gulf.

Crude traders in Asia said they were tracking their open positions, but did not see any immediate or large scale impact of the sanctions on physical flows of Dubai-linked crude into Asia.

The March/April Dubai intermonth spread was seen pegged at minus 12 cents/b at 11 am in Singapore (0300 GMT), which was up from minus 16 cents/b assessed on Tuesday at 0830 GMT, the 4:30 pm close in Singapore.

The April/May spread ticked upwards to flip out of a contango of 5 cents/b assessed Tuesday, to be pegged at a backwardation of 8 cents/b Wednesday morning.

The April Brent/Dubai Exchange of Futures for Swaps spread rose as a result of an amplified price reaction in the Brent end of the spread, widening to $1.68/b Wednesday morning. It had been assessed at $1.49/b Tuesday.

Still, the spread remains on the downside of the $3/b mark for workable arbitrage flows from Europe into Asia, traders said.

The US imposed sanctions on Rosneft Trading SA, the Geneva-based subsidiary of the Russian state oil company late Tuesday, for supporting Venezuela's oil sector by continuing to trade with sanctions-hit PDVSA, concealing shipments and handling more than half of the country's oil exports, senior US administration officials said during a briefing.

While the action could have a significant impact on global oil flows, the State Department said it was "confident that energy markets will remain stable."

"Global oil markets are adequately supplied," a senior administration official said. "So while we think this is a serious action, global markets will remain stable."