Dubai crude futures reaction to Venezuela tempered by poor spot market demand for Middle East crude

Singapore — The Middle East crude complex, led by the Dubai crude futures and Brent/Dubai spreads, rose during mid-morning Asian trade Thursday after Venezuela declared an emergency for its energy industry in response to US sanctions against Russian company, Rosneft.

Market reaction failed to lift prompt Dubai spreads out of the contango structure, however, with a discounted spot market for sour crude cargoes in Asia tempering upward sentiment.

The April Brent/Dubai Exchange of Futures for Swaps spread widened Thursday morning to be pegged at $1.65/b at 11 am in Singapore (0300 GMT), while it had been assessed at $1.46/b at Wednesday's 0830 GMT close.

Venezuelan President Nicolas Maduro decreed an emergency Wednesday to guarantee the country's energy security and the restructuring of state-owned PDVSA in response to US sanctions against Russian company, Rosneft.

Global oil markets, including that of the Middle East, rose on the news, but the prompt March/April intermonth Dubai crude futures spread maintained a contango of 6 cents/b Thursday morning, higher than the minus 14 cents/b assessed Wednesday.

Intermonth spreads further down the curve -- that had flipped to a backwardated structure earlier this month -- continued to rise. The April/May spread for instance, rose to 26 cents/b at 11 am Thursday in Singapore, whereas it had been assessed at 13 cents/b at the 4:30 pm close on Wednesday.

The US imposed sanctions on Rosneft Trading SA, the Geneva-based subsidiary of the Russian state oil company, on 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, according to previous reports.

Bullish sentiment for ongoing developments related to the sanctions was tempered by a buyers' market for Middle East sour crude in Asia. According to market participants in Asia Thursday morning, the closely tracked Qatari tender offering Al-Shaheen, Land and Marine crudes had been awarded in discounts, save for one Al-Shaheen cargo.

Details on the tender were still emerging, with traders reporting an average of 4 cents/b for the three Al-Shaheen crude cargoes. The Qatar Marine and Land cargoes were reported to have been sold in discounts ranging from minus 30 to minus 50 cents/b to Platts front-month Dubai crude assessments.

The tender typically cements spot market sentiment for Middle East crude in Asia each month.

April cash Dubai was assessed at a discount of 31 cents/b under April Dubai futures at 4:30 pm in Singapore on Wednesday, reflective of bleak demand in Asia this month.